The upcoming earnings report for Apple could create a big market move that options traders can take advantage of, according to Goldman Sachs. John Marshall, head of derivatives research at Goldman, said in a note to clients that the tech giant's earnings report after the bell on Aug. 1 could deliver a positive surprise.
"[Goldman] Hardware analyst Michael Ng expects Apple (AAPL) to deliver an EPS beat at upcoming quarterly earnings driven by solid growth expectations for iPad/Mac and Services. He believes investor focus will be centered around iPhone demand, AI investment and valuations," the research note, published on Wednesday, said. Additionally, the market seems to be expecting a lot of movement for the stock around the quarterly report.
"AAPL two-week implied volatility of 31 is in its 93rd percentile relative to the past year, and we see potential for an uptick in volatility approaching earnings. Options investors are bullishly positioned," the note said. The firm highlighted $225 strike price straddles expiring Aug.
9 as way to bet on earnings-related volatility. A straddle is a type of options strategy involving a call and put option on a stock with the same expiration date and strike price. A call option serves as a bet that the stock will rise above the strike price, while a put option works when a stock falls.
The idea of combining the two in a straddle is to bet on volatility increasing, regardless of whether the stock rises or falls. The Goldman note was written.
