Apple shares just hit a record. Here's how trader Mike Khouw is playing the move
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Apple continues to prove itself as the ultimate market safe haven.
Even as broader tech names and momentum plays have faltered, Apple has hit new all-time highs. Investors view the Cupertino titan as uniquely "above the fray," remaining largely insulated from the eye-watering AI capital expenditure cycles of the mega-cap hyperscalers while avoiding the supply chain exposure of pure-play chipmakers. It has also, so far, avoided some of the pain that some in the AI mosh pit have suffered recently.
Apple, YTD Heading into this quarter's earnings report Thursday after the bell, options pricing reflects this calm. The options market implies a modest post-earnings move of just 3.8%, making volatility premiums surprisingly reasonable across the board.
Here two ways to play it into earnings, one to hedge and the other to play for a move higher.
For investors sitting on substantial gains, protecting profits ahead of the print is rarely this inexpensive. Institutional flow is already signaling a defensive tilt: one of the more notable institutional blocks that traded today was exactly that, a purchase of 3,500 August $310 puts; the trader paid $2.22/contract.
The Cost: Protection costs roughly 65 basis points (0.65%) of the current share price. In this setup, long holders would be protected below $307.78
The Setup: The $310 strike sits higher than where the stock traded during its previous quarterly report. Buying downside protection here allows long holders to lock in a substantial portion of the recent run-up while risking less than 1% of total position value.
If you aren't long but want upside participation, buying shares outright asks a tremendous amount of your capital. Apple currently trades at 35x+ forward earnings—its highest valuation multiple since 2007. Chasing full-sized equity positions at peak multiples while the broader tape softens creates an uncomfortable risk/reward entry.
Instead, prospective buyers should look to long calls or bull call spreads:
The Benefit: Buying call options leverages upside potential if Apple beats expectations while strictly capping your maximum risk.
Risk Management: You avoid full equity exposure if the stock's elevated 35x multiple experiences a sudden re-rating lower.
Reasonable options pricing into this print creates clean opportunities on both sides of the trade. Long shareholders can lock in downside protection for pennies, while prospective bulls can capture potential earnings momentum without taking on full valuation risk at record-high multiples.
watch now VIDEO 01:02 Options traders expect big moves for mega-cap tech post-earnings Oliver Renick 3 hours ago watch now watch now VIDEO 03:24 Here's how to play this tech giant's stock as it reaches a record high Michael Khouw 5 hours ago watch now watch now VIDEO 01:26 Options Action: Robinhood reports tonight Read More Subscribe to CNBC PRO Subscribe to Investing Club Licensing & Reprints CNBC Councils Select Personal Finance Join the CNBC Panel Closed Captioning Digital Products News Releases Internships Corrections About CNBC Site Map Podcasts Careers Help Contact News Tips Got a confidential news tip? We want to hear from you.
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