Options Analysis: AAPL, FB Into Earnings

I have been studying both Apple (AAPL) and Facebook (FB) closely into earnings next week. While both companies look great, I think they are both due for a dive. Take a quick look at FB skew structure in the cycle that has its earnings. Notice how flat the curve is and how well bid the calls are. This is almost always a sign of traders dumping stock and levering up on calls and/or the retail public exuberantly buying the stock ahead of earnings. Additionally, the IV of the options as a whole are off the charts high. FB vol is higher now than when it listed.

At this point I would flatten up a long position in both AAPL and FB and look to take some money off the table. I have a small position personally in my IRA that I will be working to close over the next few days.

Moving into earnings next week I will likely set up a front spread trade for TheStreet that could potentially kill it if FB moves higher by 10%, or so, but will do well if the stock drops, which I think is more than likely to happen.

In terms of AAPL, the movement is not nearly as bad, but still looks screwy, as it is feeling toppy. If I had a position I would be lightening it up.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits

Mark can be followed on Twitter at twitter.com/OptionPit

At the time of publication, Mark Sebastian held positions in AAPL, FB.

More from Options

Amazon's Stock Is Facing a Major Test

Amazon's Stock Is Facing a Major Test

Here's a Better Way to Hedge Using Stock Options

Here's a Better Way to Hedge Using Stock Options

Let the Najarian Brothers Crash-Proof Your Portfolio

Let the Najarian Brothers Crash-Proof Your Portfolio

Let the Najarian Brothers Help You Generate Income With Options

Let the Najarian Brothers Help You Generate Income With Options

Learn Options Trading from the Najarian Brothers, the Best in the Business

Learn Options Trading from the Najarian Brothers, the Best in the Business