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Apple (AAPL) - Earnings, an increased dividend? Options that buffer cost basis in volatile times.
3 min read

Apple (AAPL) - Earnings, an increased dividend? Options that buffer cost basis in volatile times.

Apple (AAPL) - Earnings, an increased dividend? Options that buffer cost basis in volatile times.

Apple Inc (AAPL) is set to report earnings on Thursday April 30th at 4:30pm ET

  • Apple will likely see a revenue hit due to the pandemic.
  • Apple historically is in good shape on cash.
  • This is the quarter the company has typically announced a bump higher in their quarterly dividend.
  • A buy-write allows a way to capture upcoming dividends while providing a lower cost basis buffer in the stock during volatile times, or potentially super charging yield.
  • See example trades in AAPL based on price targets HERE

The Set Up

AAPL reports Thursday April 30th 7:30am ET.

  • Consensus Expectations: ¬†Consensus: ¬†$2.10Revenue: ¬†$54.00 Bil

Feb highs ~$325, March lows ~$225, now about halfway in between ~$270

From OptionsAI technology, 3 month expected move:

Ways to Play

AAPL has seen some volatility alongside the broader market and all eyes will be on the guidance they give on the 30th as they removed prior guidance from January. It is also the quarter that AAPL has typically increased their dividend for the next year, here's the last time, with the May date bumped up by .04.

Expectations are with that their free cash flow will allow them to do the same this year, despite the hit they'll likely take to sales in the past quarter.

Ways to Play: Using the expected move on buy-writes

In normal times a way to supercharge a bullish dividend play is to own the stock, (capturing the dividend) while selling an upside call and potentially adding even more yield. These are not normal times and the overall volatility of stocks and the chance for a stock to go substantially lower can outweigh any benefits from a dividend. However, if one was bullish in AAPL, a call sale versus long stock can act as a small buffer against any disappointment in the stock on earnings or it being dragged down by the broader market.

Using Options AI technology, a price target near $300 in 40 days shows a 22% likelihood for an 11% move higher:

One of trades generated for that target is a buy-write, shown here alongside simply buying stock:

One can easily see that the buy-write increases probability of profit and increases profitability at the price target. It does that by lowering the breakeven on the trade, or the cost basis, visualized here:

Profits are capped at $300 in the stock but the call sale at $6.00+ provides a decent buffer in the overall trade profile.

With volatility still pumped for most stocks this is a good way to trade from the long side as it doesn't "define" the risk of a stock going lower, but does buffer for small moves lower. No one knows where AAPL goes next but, this is a stock alternative strategy to consider on any stock on the shopping list in such a volatile market.

Give it a try with your own price target in HERE

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