On CNBC’s “Options Action”, Dan Nathan spoke about an options strategy in Apple Inc. (NASDAQ: AAPL), ahead of the earnings report. The company is going to report earnings on April 30 and the options market is implying a move of 4 percent in either direction.
Nathan suggested that investors with a long position in Apple, who are concerned about an extreme move to the downside on the earnings, should consider a purchase of a collar.
He would sell the May 212.50 call for $2.15, against a long stock position of 100 shares and use the proceeds to buy the May 192.5 put. The trade offers protection below $192.50 and it limits upside to $212.50. Investors can maximally lose $11.80 with the trade, which is a difference between the current stock price and the strike of the put.
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