How one trader plans to triple his money in Apple

Apple has fallen 5 percent from its recent high, and one trader expects more volatility from the stock when it reports earnings Tuesday afternoon.

The options market is currently implying a 3 percent move for the stock in either direction by Friday's close. But given last week's sell-off in tech and the sector's failure to regain those losses on Monday, Todd Gordon of TradingAnalysis.com said Apple, which has recently "settled in around a $150 range," will likely stay within that consolidation even after reporting earnings.

"I see the market, as well as Apple, falling into a little bit of a range here," said Gordon Monday on CNBC's"Trading Nation." "Technology has lost its uptrend and is falling into a sort of sideways range, and I think we can use this to our advantage heading into earnings."

To play this range to his advantage, Gordon suggested using a put butterfly trade structure. This involves selling two option contracts at a middle strike price while buying one contract at a higher strike price, and the other at a lower strike. The goal is for the stock to hit that middle strike.

Specifically, Gordon bought the August 4 weekly 145/150/155 put fly for $1.34. Since each option accounts for 100 shares of stock, the most Gordon can lose on this trade is that $134. If Apple closes at $150, the middle strike price, on August 4 expiration, then Gordon would make about $370 on the trade, for a return of three times his money.

Apple is up 28 percent year to date but has failed to make meaningful gains since early May.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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