Back Derivatives Strategy

With Outsized Moves to the Upside Happening With Less Frequency, Consider These Three Trades for Mag-7 Names Ahead of Earnings

Published on April 30, 2025

Jeff Jacobson

As we make our way thru earnings season, one overriding theme I continue to see is the large upside moves that had been prevalent for many of the largest companies on earnings seems to be happening with far less frequently. Perhaps this is a function of the macro backdrop, but should this continue to play out then employing option strategies that are short upside “expensive” volatility in the context of an existing long equity position should be strongly considered. Along those lines, here are three different trades to consider using AAPL as an example, but can be applied to the other Mag7 names that will be reporting in the next week (MSFT, META and AMZN). Please feel free to reach out to me or the 22V sales desk to discuss any of these ideas for any of the names that will be reporting and for updated pricing and execution capabilities.

Trade #1 – sell covered calls

Trade
Sell AAPL June 220 calls @ $5.40 (AAPL 207.90 ref)

Selling the June 6% (434-delta) upside calls against an existing long AAPL equity position
While down from the highs, upside implied volatility remains well above the lows
Call sale yields 2.6% (18.4% annualized)
Upside breakeven of 225.40 by June expiration. This is not only 8.7% above current levels (after the 25% rally off the recent lows), but is also just below the 200-day moving average (which it broke below in March)
AAPL has had exactly ONE decent upside move on earnings over the last 7 reports (6% gain in May 2024 but that was after stock had declined from 200 to < 170)

Trade # 2 – low-cost put spread collar

Trade
Sell AAPL June 220 calls
Buy AAPL June 200/170 put spread

Trades for a small debit (AAPL 207.90 ref)

Selling the 6% upside calls to buy the wide protective put spread that starts less than 4% below spot
Stock just rallied 25% off the lows and should have upside resistance ~ 220-225 as that was the level stock was trading at before the tariffs were announced
Put spread is capped to the downside at the recent lows ~ 170

Trade #3 – costless 1×2 call spread overlay

Trade
Buy AAPL June 210 calls 1x
Sell AAPL June 220 calls 2x
Trades for a small credit (AAPL 207.90 ref)

Buying the costless 1×2 June call spread following sharp rally off the lows
Option trade outperforms between 210 and 230 with NO added downside risk
Max profit at 220 level – just below the pre-tariff highs

AAPL shares had rallied ~ 25% off their lows as we head into earnings

AAPL 2-month (June) 5% upside call implied volatility remains well above the lows even after the sharp pullback from the recent highs

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