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Worried about Apple earnings? How to get protection--for free!

Free protection in Apple
Free protection in Apple

It's make-or-break time for Apple this week.

Shares of the tech darling have fallen nearly 16 percent in the last three months as concerns over slowing shipments of the company's iPhone 6S have weighed on investors. It all comes to a head on Tuesday when the company is slated to report is fiscal 2016 first-quarter earnings, and the options market is expecting some huge moves.

That market is implying a more than 6 percent move for Apple in either direction after its earnings report. That's higher than its average 4.9 percent move and could represent a more than $35 billion shift in market cap.

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Options traders calculate the implied move for equities by measuring a particular stock's straddle — or at the money put and call. The amount of the straddle typically captures market makers' expectations for how much a stock is going to move.

At this point, Apple has fallen 25 percent from its all-time high last April, but Wall Street analysts remain optimistic on the stock. Of the 52 who cover Apple, the average rating is a "buy" with a $140 price target. That's nearly 40 percent higher than the current stock price of around $100, according to FactSet.

"Investors really aren't buying what Wall Street banks are saying about Apple here," RiskReversal.com founder Dan Nathan told CNBC's "Options Action" on Friday. "It's obviously a bit of a contentious situation."

For those looking to protect themselves from further losses, Nathan offered a cost-free options trade called a collar. In this kind of strategy a trader will, against a long position, sell an upside call and use those proceeds to buy a downside put.

The trade allows the holder of the stock to profit up to the strike of the call that they sold, at which case that long stock will be called away. On the downside, the long position is protected below the strike of the put that was sold. The strategy is ideal for investors who are cautiously bullish on a stock, but don't want to sell.

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Specifically, Nathan recommended buying the March 110/90 collar for even money versus 100 shares of Apple at $100.

"If you think there is downside risk this is a good way to finance a downside put and help you sleep at night," he said.