Apple shares hit a record high before earnings. Options pricing implies a 3.8% move. Trader Mike Khouw outlines two plays: a put hedge and a call spread for upside.
Apple shares hit a record high ahead of Thursday's earnings report. The stock has climbed as investors see it as less exposed to the AI spending cycle and supply chain issues that have weighed on other tech names.
Options pricing suggests a modest post-earnings move of 3.8%, according to market data. The relatively low volatility premium makes options cheaper than typical for an Apple earnings event.
Trader Mike Khouw, who follows options flow, outlined two strategies for the print.
For shareholders sitting on gains, Khouw pointed to a put hedge. An institutional block of 3,500 August $310 puts traded at $2.22 per contract, data show. The trade protects against a drop below $307.78. The cost is about 65 basis points of the current share price, allowing long holders to lock in recent gains for less than 1% of position value.
For those who want upside exposure without buying shares at Apple's 35x forward earnings multiple, a level not seen since 2007, Khouw recommended call options or bull call spreads. Buying calls caps the maximum risk while still capturing potential gains if the company beats expectations. The strategy avoids full equity exposure in case the multiple re-rates lower.
Apple reports after the close Thursday. Options pricing into the event remains reasonable, traders said.
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