On CNBC's "Options Action", Dan Nathan spoke about an options strategy in Apple Inc. AAPL, ahead of the earnings report. The company is going to report earnings on April 30 and the options market is implying a move of 4 percent in either direction.
Nathan suggested that investors with a long position in Apple, who are concerned about an extreme move to the downside on the earnings, should consider a purchase of a collar.
He would sell the May 212.50 call for $2.15, against a long stock position of 100 shares and use the proceeds to buy the May 192.5 put. The trade offers protection below $192.50 and it limits upside to $212.50. Investors can maximally lose $11.80 with the trade, which is a difference between the current stock price and the strike of the put.
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