Traders say Apple could see a big move on earnings. Here's how to play it

Few big surprises are expected from Apple this quarter after its pre-announcement earlier this month.

But, the options market has other ideas. Traders are expecting a sizeable move for the mega-cap when it reports after the bell, says Todd Gordon, founder of

"The options market for tonight is expecting roughly a $6.30 move higher or lower. That is the plus and minus one standard deviation," Gordon said on CNBC's "Trading Nation" on Tuesday. "Roughly 68 percent of the occurrences of Apple's stock price should, according to the options math, be between $150.24 and $162.64, so you have a $12 range."

At the time of Gordon's trade, a $6.30 move higher for Apple implied 4 percent upside and downside.

"All the stocks along with Apple heading into earnings certainly have elevated implied volatility, and what will happen right here is after the earnings come out tonight, that implied volatility will drop. You can use that to your advantage," Gordon said.

To do that, Gordon is executing a call credit spread trade where he sells a $162.50 call and buys the next strike up at $165. Then, to offer protection, he is selling a $150 put and buying the $148 put.

That trade offers $113 of profit if Apple finishes between $150.16 and $162 by Feb. 1 expiration. If Apple drops below $150, the trade will have a maximum loss of $87. If Apple rallies sharply above $162, the trade would lose $137.


Trades to Watch

Trader Bios


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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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