As the market waits for Apple to report earnings after the bell Tuesday, one trader has devised a method to cash in.
Todd Gordon of TradingAnalysis.com starts by pointing out that the tech giant is expected to rise or fall just $3.50 on earnings. Yet Apple moved more than the options market expected in the past two earnings events. For instance, when its April earnings report missed expectations, the stock fell more than 6 percent.
With such a mild move expected this time around, Gordon said Tuesday on CNBC's Trading Nation that "expectations are a little too low."
So if Apple is set to move more than expected, which direction will earnings take it?
Based on the charts, Gordon sees the stock going higher. Apple has been badly lagging its large-cap tech brethren of late, and he sees that trend tuning around.
To play for the expected move, Gordon recommends an out-of-the-money option call spread as a quick trade on Apple.
Specifically, he recommends buying the 101-strike weekly calls expiring on Friday, and selling the 102-strike calls. This trade will cost a total of 24 cents per share, and return a profit of 76 cents, or 317 percent, if Apple closes the week at $102 or above.
"It's a little bit of a gamble," Gordon granted, "but we have an attractive reward-to-risk ratio."
