AAPL keynote 2018

Apple Purchase Intent Mentions during Keynotes have been a great predictor of AAPL stock over the following 9 months.

This year's keynote saw disappointing purchase intent levels.

Hi friend,

We are halfway through earnings season, things are going pretty well.  Not our best season so far but overall nice plays from the Sunday Sheets.

There are 4 or 5 plays that I'm going to take tonight, and AAPL is one of them (SHAK, BABA, YELP, and P are also showing some opportunity).

But I wanted to give you some insight into how my trading brain works, especially on a really popular stock.  Not so that you can just copy my trade... but more to just give you exposure to an alternate way of thinking through your trades.

Here's my thinking on AAPL going into tonight's earnings:

  • PI Mentions during their big keynote have been a great predictor of AAPL stock over the following 9 months (NOT a single quarter event)
  • Those PI mentions were significantly down at the 2018 keynote, so I want to position myself bearish on AAPL with an expected hold time through July 2019
  • I don't want any crazy exposure on AAPL into tonight's event, as our data has NOT been extremely predictive on a quarter by quarter basis.

So I'm looking to take a longer term bearish view without being too risky tonight. 

I'm going to SELL the NOV 230 calls on AAPL for $3 or higher each.  Thinkorswim users can paste the following in to see what I'm talking about:  SELL -1 AAPL 100 16 NOV 18 230 CALL @3.00 LMT [TO OPEN]

Here are the scenarios, which I always like to look at in order of "IF I AM WRONG" first:

If AAPL reports a great number and moves up even more than expected, above $230/share and stays above $230/share through the November expiration in a couple of weeks, I will be assigned a short position on AAPL at a price of $230/share, plus the $3 I got for the call option, giving me a net entry price SHORT AAPL at $233.  I'm very comfortable with that entry point.

If AAPL has a good report and moves up slightly, but stays under the $230 level, I will simply pocket the $3/share profit from this trade, as the calls I sold will expire worthless in 15 days.

If AAPL has a bad report and moves lower, I will simply pocket the $3/share profit from this trade, as the calls I sold will expire worthless in 15 days.

In other words -- no matter what happens tonight, I will either be on my way to a quick $3/share profit OR I establish a short position on a stock I'm bearish on at a price 6% higher than today's price.

I like those odds, and I really like being able to play an earnings report without having too much conviction about the report itself.

Happy Trading!

Andy Swan
founder, LikeFolio

We always keep our signals confidential but please feel free to share this educational email with others.