The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( TheStreet) -- Everything changes after a $90 selloff. Apple ( AAPL) hit $556 on Monday morning and all of a sudden it looks like the 50/50 odds of iPhone weakness is already priced in. Two weeks ago, we figured the stock would rise $100 if Apple beat iPhone estimates and it would drop $100 if it missed. Investors, including us, have given the majority of their attention to the negative 50% odds, but what about the positive 50%? We know that Verizon iPhone sales declined by 1 million units from the holiday quarter and we will find out what happened at AT&T ( T) when it releases results on Tuesday morning. Verizon and AT&T are both important pieces to the puzzle but 63% of iPhone activations occurred outside of the U.S. last quarter.
At this moment, we think there is a 50% chance that Apple will beat estimates and will report sales of 35 million iPhones. Those odds are much more appealing with Apple trading at $570 than they were with Apple trading at $644. If AT&T shows better iPhone results than Verizon, then the chances that Apple sells more than 35 million goes up above 50%. We are going to make our portfolio allocations dependent upon AT&T. Our first move for today is to sell out of the 2% allocation of AAPL April 2012 $600 puts that are up 60% since we bought them on Thursday. Tomorrow, we will add a new 10% allocation of AAPL October 2012 $550 calls if AT&T shows better than Verizon. If AT&T shows that it is sequentially flat or even up over the holiday quarter, then we will add an additional 10% allocation of AAPL May 2012 $560 calls to take advantage of the rapid recovery that will quickly occur. Earnings season is a volatile time which is why you want to take profits beforehand. By having over 80% of the portfolio at ApplePlusPortfolios.com in cash, we are able to take advantage of unforeseen selloffs. The $90 correction in AAPL marks a great long-term entry point.