Options market sees big earnings move for Apple

Tue Apr 24, 2012 4:08am EDT
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By Angela Moon and Doris Frankel

NEW YORK (Reuters) - The wild ride in Apple shares this year could get even more interesting when the company reports quarterly results after the bell on Tuesday.

Judging by trade in the options market, investors expect Apple shares to jump or fall by about 7.5 percent, a much greater swing than the average post-earnings move of about 4.25 percent in the past four quarters.

Apple shares have experienced wild swings since touching an all-time high of $644 on April 10. The stock closed down 0.2 percent at $571.70 on Monday, but is up about 41 percent for the year.

Although the moves in Apple shares have been a huge story for financial markets all year, results for the latest quarter will be released in a more anxious environment.

"The reason why the move this time is greater than previous is because there is just so much uncertainty, as the global economy is giving mixed signals," said JJ Kinahan, chief derivatives strategist for TD Ameritrade in Chicago.

"Investors are expecting Apple to beat earnings but they also expect Apple to give out a guidance of a slowdown going forward."

Based on the activity of weekly Apple options - mostly used for short-term bets and earnings plays as they only have a week-long lifespan and expire every Friday - Apple shares are expected to move by $43, or 7.5 percent, in either direction.

Such a move would be the biggest since the shares fell by 10.6 percent when results for the fourth-quarter of 2007 were released in January 2008.   Continued...

An Apple retail store is seen in Carlsbad, California April 6, 2012. REUTERS/Mike Blake