Option trade on Apple ahead of earnings

Apple (AAPL) will report earnings on April 25th in ten days after the market closes, and option premiums present an attractive opportunity that traders can take advantage of ahead of their report. Apple has rallied close to 22% since mid February along with the rest of the market, and concerns over the growth and popularity of the Watch seem to have faded. AAPL dropped 6% after the last earnings release in January 2016, which was during the period when the S&P and global markets were getting pummeled.

There are three tailwinds that we see for AAPL in the next few months.

1. The US Dollar has weakened which should give earnings a slight boost as FX risk is lower for overseas revenue.
2. The new pricing model which allows customers to pay monthly with periodic refreshes should boost market share and margins.
3. Penetration into streaming music and growth on the app store are high margin levers if we strong results in these areas.

Risks still exist if iPad sales are sluggish, or iPhone SE sales are weak, however we don't see a 10% correction coming anytime soon in the backdrop of a relatively healthy US market over the next 30 days.

Ahead of earnings we are selling the May1 Weekly $100 strike Puts for $.43 cents. We will keep the premium if the stock stays above $99.57 over the next 21 days, or we may have to buy the stock if AAPL's stock drops $12.50 over the next 3 weeks. Picking up the stock at a PE ratio of 10.7 would be a great value if it does drop.