Apple could move 4.3% after earnings. Options traders are paying a premium to find out which direction.
Apple (AAPL$345.39) is set to report earnings after the US market closes on November 2, and the options market is pricing in a much bigger move than usual.
Here’s the setup:
$347.10: AAPL closing price on October 27.
±4.3% implied move: Options expiring November 4 suggest a potential trading range of roughly $332 to $362.
2% average move: Apple’s average next-day move across its previous eight earnings reports, with six sessions ending lower.
5.2% implied move: Options expiring November 13 are pricing in an even wider potential move.
The catch? Buying options isn’t just about guessing the direction.
If you correctly predict that AAPL will rise but the actual move is too small, you can still lose money because the option premium may be too expensive. That’s the risk of implied volatility collapsing after earnings, often called a volatility crush.
My take: the market isn’t simply asking whether Apple will beat earnings. It’s asking whether the result will be dramatic enough to justify the price traders are paying for protection and speculation.
Wall Street can predict the direction correctly and still lose the trade. The house always has another spreadsheet.
Will Apple deliver a big enough surprise to beat the options market’s expectations, or is the volatility premium already too expensive?
Apple (AAPL$345.39) is set to report earnings after the US market closes on November 2, and the options market is pricing in a much bigger move than usual.
Here’s the setup:
$347.10: AAPL closing price on October 27.
±4.3% implied move: Options expiring November 4 suggest a potential trading range of roughly $332 to $362.
2% average move: Apple’s average next-day move across its previous eight earnings reports, with six sessions ending lower.
5.2% implied move: Options expiring November 13 are pricing in an even wider potential move.
The catch? Buying options isn’t just about guessing the direction.
If you correctly predict that AAPL will rise but the actual move is too small, you can still lose money because the option premium may be too expensive. That’s the risk of implied volatility collapsing after earnings, often called a volatility crush.
My take: the market isn’t simply asking whether Apple will beat earnings. It’s asking whether the result will be dramatic enough to justify the price traders are paying for protection and speculation.
Wall Street can predict the direction correctly and still lose the trade. The house always has another spreadsheet.
Will Apple deliver a big enough surprise to beat the options market’s expectations, or is the volatility premium already too expensive?
