Apple options earnings trades draw focus as shares hit record
Apple hit a record before Thursday earnings, while CNBC’s Mike Khouw pointed to lower-cost options hedges and call strategies.
By Dev Ramirez · Crypto Correspondent
· 3 min read
Apple options earnings positioning is getting attention after the stock climbed to a record ahead of the company’s quarterly report Thursday after the closing bell. For everyday investors, the setup matters because the options market is pricing a relatively contained reaction even as Apple trades at its highest valuation multiple in years, according to CNBC.
CNBC’s Options Action said Apple shares were recently at $343.02, up $2.94, or 0.86%, at 1:50 p.m. EDT on Nasdaq last-sale data. The move put the stock at fresh all-time highs while some broader technology and momentum names have weakened, CNBC reported.
Mike Khouw, a trader featured by CNBC, framed Apple as a market shelter compared with other large technology companies tied more directly to artificial-intelligence spending or chip supply chains. CNBC said investors have treated Apple as less exposed to the heavy AI capital expenditure cycles facing mega-cap hyperscalers and less exposed than pure-play chipmakers to supply-chain pressures.
What is the Apple options earnings setup?
CNBC said options prices imply a 3.8% move in Apple after earnings. An implied move is the market’s estimate, based on option prices, of how much a stock may swing around an event; it is not a forecast that the stock will move by exactly that amount.
That relatively modest implied move led Khouw to discuss two options approaches on CNBC: one for investors who already own Apple and want protection, and one for investors looking for upside exposure without buying the stock outright.
For current shareholders, Khouw highlighted a downside hedge using put options. A put option gives the buyer the right, though not the obligation, to sell shares at a set price by a certain date, which can help limit losses if the stock falls.
CNBC reported that one notable institutional trade involved the purchase of 3,500 August $310 puts at $2.22 per contract. Khouw said that hedge cost about 65 basis points, or 0.65%, of Apple’s share price. In that example, the protection would begin below $307.78, CNBC said.
The $310 strike price sits above where Apple traded around its prior quarterly report, according to CNBC. Khouw’s point was that shareholders with large gains could buy protection before earnings while putting less than 1% of the position’s current value at risk for the hedge.
How calls change the risk for prospective buyers
For investors who do not own Apple but want exposure to a possible move higher, Khouw discussed buying call options or using bull call spreads, CNBC reported. A call option gives the buyer the right to purchase a stock at a set price, while a bull call spread pairs a bought call with a sold call to reduce cost and cap potential upside.
CNBC noted that Apple trades at more than 35 times forward earnings, its highest valuation multiple since 2007. Forward earnings are analysts’ estimates of future profits, and the multiple shows how much investors are paying today for each expected dollar of those profits.
Khouw said options can define the maximum loss upfront, unlike buying a full stock position. That distinction is especially relevant when a stock is at a record and its valuation could fall if investors decide the price is too high relative to expected earnings, CNBC reported.
The core takeaway from Khouw’s CNBC segment was that calmer options pricing gave both existing shareholders and prospective buyers ways to express a view around Apple’s earnings without taking the same risk as an unhedged stock position. The trades described are market examples and strategy discussion, not individualized investment advice.
This story draws on original reporting from CNBC.
