Preface
With the market's direction becoming tenuous, we can explore option trading opportunities in Apple Inc (NASDAQ:AAPL) that do not rely on stock direction. It turns out, over the long-run, for stocks with certain tendencies like Apple Inc, there is a clever way to trade market anxiety or market optimism before earnings announcements with options.



The Trade Before Earnings
What a trader wants to do is to see the results of buying an at the money straddle a few days before earnings, and then sell that straddle just before earnings.

This trade is not a panacea, which is to say, we have to test it, stock by stock, to see when and why it worked. We start with Apple Inc.

Here is the setup:



We are testing opening the position 7 calendar days before earnings and then closing the position 1 day before earnings. This is not making any earnings bet. This is not making any stock direction bet.

Once we apply that simple rule to our back-test, we run it on an at-the-money straddle:

Returns
If we did this long at-the-money (also called '50-delta') straddle in Apple Inc (NASDAQ:AAPL) over the last three-years but only held it before earnings we get these results:

AAPL
Long At-the-Money Straddle

% Wins: 75.00%
Wins: 9 Losses: 3
% Return:  101.8% 
% Annualized:  619.3% 

Tap Here to See the Back-test

The mechanics of the TradeMachine™ are that it uses end of day prices for every back-test entry and exit (every trigger).

We see a 101.8% return, testing this over the last 12 earnings dates in Apple Inc. That's a total of just 60 days (5 days for each earnings date, over 12 earnings dates). That's an annualized rate of 619.3%.

We can also see that this strategy hasn't been a winner all the time, rather it has won 9 times and lost 3 times, for a 75% win-rate and again, that 101.8% return in less than two-full months of trading.

Here is a 1-minute and 25-second video that shows you exactly how to do this for any stock and what every professional option trader would rather that you don't see.

Learn more here: Try the Back-tester Yourself

Setting Expectations
While this strategy has an overall return of 101.8%, the trade details keep us in bounds with expectations:
      The average percent return per trade was 8.97%.


Option Trading in the Last Year
We can also look at the last year of earnings releases and examine the results:

AAPL
Long At-the-Money Straddle

% Wins: 75.00%
Wins: 3 Losses: 1
% Return:  49.3% 
% Annualized:  899.7% 

In the latest year this pre-earnings option trade has 3 wins and lost 1 times and returned 49.3%.
      Over just the last year, the average percent return per trade was 11.92%.



WHAT HAPPENED
This is it -- this is how people profit from the option market -- finding trading opportunities that avoid earnings risk and work equally well during a bull or bear market.