If you believe AAPL will decline following today's earnings report, here is a no-risk way to profit from that decline. While this may not be the most profitable way to play the earnings report, it does offer a way to profit with no risk.
Some people may be familiar with the collar strategy, where one seeks to limit their risk by purchasing a stock, selling an OTM call against the stock, and purchasing an OTM put to mitigate risk. These collars can be configured to offer protection against a decline at no cost, if the premium received from the sale of the call is enough to offset the purchase of the put.
Collars can also be configured, at times, to offer potential profit with no risk of loss of principle. AAPL, at the moment, offers just such an opportunity.
Earlier today one could have put a collar on AAPL by selling the Apr 19 '24 Call for 16.10, and buying the Apr 19 '24 180 Put for a total cost of $174.67/share, or a total of $17467. If AAPL remains above $180, the stock will be called at that price, resulting in a minimal profit of $17,500 - $17,467 = $33.00. If AAPL falls below $180, the put begins to be profitable and adds to the gains up to a maximum profit of $533. This represents approximately a 3.05% gain in about six weeks.
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