OptionsPlay Blog

The iPhone 6 that Apple has released today is breaking their long time tradition of making phones that have smaller screens to finally catch up to the other brands like Samsung and HTC that have experienced explosive market share of smartphones with their bigger screens. Apple is here on the defensive and playing catch up which makes this announcement particularly interesting to watch. As buyers line up in front of Apple stores around the world, I wanted to take a look at how the markets tend to react to such news and see if there’s any way to play it.

First before we look at past releases, Apple has had a huge run up this year, of 28.2% return YTD. This price appreciation is despite earnings falling quarter after quarter in 2014. We know that markets are forward looking so perhaps this is due to market expectations of what’s to come, and warrants a deeper dive…

Once we look at all the major releases of iPhones since the first one, we notice something interesting. We saw that after the actual release date of the phone (not announcement date) that out of the 6 Major iPhone refreshes (iPhone 3G, 3GS, 4, 4S, 5 and 5s/5c) the stock moves on averageĀ  4.9% lower over a 12 trading day period following the release date. This is a significant move over a fairly short period of time which is great for looking for an Options trading opportunity.

We decided to look at a very simply strategy of buying an at the money Puts that were closest to 45 Days from expiry, on the date of the release and holding it for the 12 trading day’s that we’ve determined a significant move happens during. We see a 26.80% return from buying these puts if we traded all 6. Moreover, if we only traded the Major Releases (3G, 4, and 5) that return increases to a whopping 71.73% return. That’s a raw return in 12 trading days, not annualized! This current release being a brand new release (not just a small upgrade) bodes well for such a strategy.

Currently the AAPL Oct 31st 102 Puts are trading at $3.90 at the time of this post.

Keep in mind that results does not guarantee future returns but buying an ATM put is a strategy with limited risk and provides unlimited upside if the stock moves lower. iPhone 6, and make sure you login to your OptionsPlay account to help you visual a trading opportunity here.

Click Here to Register for an OptionsPlay Account and start building your own trade on AAPL!

-Tony Zhang