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Successful Earnings Option Trading: Apple Inc (NASDAQ:AAPL)

Apple Inc, AAPL, earnings, short put


Apple Inc (NASDAQ:AAPL) : Option Trading A Clever Short Put

Date Published:

PREFACE
As we look at Apple Inc we note that a short put is one of the most common implementations of an option strategy, but the analysis completed when employing the short put often times lacks the necessary rigor especially surrounding earnings. This is a risky strategy, but there is a clever way to reduce risk.



Option trading isn't about luck -- this four minute video will change your trading life forever: Option Trading and Truth
With relative ease, we can go much further -- to identify the risks we want to take, and those that we don't in order to optimize our results. This is one of those cases.

STORY
There's actually a lot less 'luck' involved in successful option trading than many people realize. We'll get specific with short puts on AAPL. Let's look at a three-year back-test of a short put strategy with these quick guidelines:

* We'll test monthly options (roll the trade every 30-days).
* We will avoid earnings.
* We will examine an out of the money put -- in this case, 30 delta.
* We will test this short put looking back at three-years of history.

What we want to impress upon you is how easy this is with the right tools. Just tap the appropriate settings.



Now we can peruse the results.

RESULTS
If we did this 30 delta short put in Apple Inc (NASDAQ:AAPL) over the last three-years but always skipped earnings we get these findings:

short 30 Delta Put
* Trade Frequency: 30 Days
* Back-test length: three-years
* Always Avoid Earnings

Gross Gain: $5,626
Gross Loss: -$2,243
Wins: 32 Losses: 6

Short Put Return:  28.4

Selling a put every 30-days in AAPL has been a pretty substantial winner over the last three-years returning  28.4%. Even better, the strategy has outperformed the short put that was held during earnings. Let's turn to that piece, now.

GOING FURTHER WITH APPLE INC
Just doing our first step, which was to evaluate the short put while avoiding earnings is clever -- certainly an analysis that gets us ahead of most casual option traders. But let's take the analysis even further.

This time, we will do the exact same back-test, but we will only look at earnings. Specifically, we will short the put two-days before earnings, let earnings happen, then close the option position two-days after earnings.



Here are those results for the same 30 delta short put:

short 30 Delta Put
* Trade Frequency: 30 Days
* Back-test length: three-years
* OnlyTrade Earnings

Gross Gain: $1,634
Gross Loss: -$777
Wins: 9 Losses: 3

Short Put Return:  7.5

While Selling an uncovered put in Apple Inc during earnings did prove to be a winner, more importantly, it returned less than the same short put that avoided earnings. While this clever use of avoiding earnings has outperformed the short put that was held during earnings, there's a bigger picture here. Let's turn to that piece, now.

TRADING TRUTHS
Moving through the analysis on Apple Inc (NASDAQ:AAPL) has done more than show us returns, it has revealed that the concept of expertise in options has been made made overly complex. The point is simple: having the knowledge before placing a trade shapes the thought process about what to trade, when to trade it and even if the trade is worth it at all. Here's how all this works in real-life, beyond Apple Inc and short puts.

There's actually a lot less 'luck' and a lot more planning in successful option trading than many people know. But it's not about trying to guess which stocks will go up or down. What the back-tester empowers you to do is find calm, low-stress stocks and ETFs and then identify the option strategies that have created a high percentage of winning trades, gaining profitability slowly, while managing earnings.

Here is a quick demonstration video of CMLviz Trade Machine Option Back-tester.
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Don't Get Outgunned
The top 1% are keenly aware of the how option strategies perform in the market. If you place trades without knowing how they've performed in the past, then the hedge funds and high frequency trade firms are taking advantage of your gap in knowledge. If you're not simulating your trading ideas, you're being outgunned by high tech trading shops.

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