To The Moon

$Apple(AAPL)$ is scheduled to release its Q4 2023 earnings result on 02 Nov 2023 after market close.

Market is expecting Apple to have an earnings per share of $1.39, with overall revenue coming in at $89.9 billion. iPhones should contribute around $45 billion in revenue.

Canalys and IDC figures indicate that iPhone shipment in Q4 should be around 50 million to 53 million. This is higher than what Morgan Stanley have forecasted at 48 million.

Currently Apple is second in the Q3 2023 market share for smartphone came in behind Samsung.

Investors would be interested to see how much revenues have this 50 million of iPhone bring to its overall revenue. Considering Apple are facing some headwinds in the production in India.

Apple (AAPL) Historical Moves Ahead of Earnings

AAPL historically moved higher heading into earnings. Apple have gained 1.7% for the 2 weeks period before earnings (based on last 12 quarters of data).

But Apple have gained 1.87% on 01 Nov trading. This seem to be inline with how the historical moves before earnings.

Apple Historical Stock Price Reaction to Earnings

Apple shares generally moved lower immediately after its earnings report, this is based on 7 out of 12 previous reports.

On average the stock moved up 0.4% in the first day of trading after the company reported earnings. We might be expecting Apple to be trading within 0.2% to 0.5% on 03 November trading session.

Apple (AAPL) Stock Behavior After Earnings

Based on the previous 12 earnings releases, AAPL is more likely to trade lower 1 day after earnings for an average loss of -0.7%

Apple Post Earnings Announcement Drift

AAPL share price has drifted down -6.0% post earnings announcement. Using the last 12 quarters data, the average drift between earnings announcements is 4.9%.

The current drift represents a negative -0.6 standard deviation move.

About AAPL's Post Earnings Announcement Drift

Current post earnings announcement drift: -6.0%

Historical average post earnings announcement drift: 4.9%

Historical post earnings drift standard deviation move: ±10.5%

AAPL Open Interest

The option open interest in AAPL climbed 2.4% to 6.7 million contracts.

The current open interest is below its 52-week average of 7.2 million contracts. Currently, the OI percentile rank is 16.1%.

So, AAPL had a higher OI 83.9% of the days in the last year.

This indicates that there is not as much demand to trade and carry option positions in AAPL. The most notable increase was in the 03-Nov-23 expiration which added +78,266 contracts.

AAPL has a total open interest of 407,263 contracts and a put-call ratio of 0.74 for options expiring Nov 03, 2023 (2 days).

AAPL Call Open Interest

The open interest in AAPL call options increased by 1.8% to 3.5 million contracts. Furthermore, call open interest is up 1.1% in the last 5 days.

Compared to its 52-week average of 3.8 million contracts, the current call open interest for AAPL is weaker than usual.

AAPL Put Open Interest

The open interest in AAPL put options has grown by 3.0% to 3.2 million contracts. Furthermore, put open interest has risen 2.1% in the last 5 days.

Compared to its 52-week average of 3.5 million contracts, the current put open interest for AAPL is lower than usual.

AAPL Put/Call Ratio (Open Interest)

In the last 5 days, the put/call ratio for AAPL increased by 0.9% to 0.9.

AAPL Post Earnings Movement

Options market overestimated Apple stocks earnings move 58% of the time in the last 12 quarters. The predicted move after earnings announcement was ±4.4% on average vs an average of the actual earnings moves of 3.8% (in absolute terms).

AAPL Earnings Implied Volatility Crush

AAPL's last earnings implied volatility (IV30) going into earnings was 25.3. The last time AAPL released earnings, the implied volatility dropped to 21.4, resulting in an implied volatility crush of 15%. 5 days after earnings, the 30 day IV was 19.8.

Average Implied Volatility Crush For AAPL Earnings: 16%

Average 30 Day Implied Volatility 1 Day Before Earnings: 34.5

Average AAPL 30 Day IV for the Day of Earnings: 29.0

Average 30 Day Implied Volatility 5 Days After Earnings: 26.9

AAPL Option Volatility Skew

Option volatility skew shows the implied volatility of options across different strike prices. AAPL has an average implied volatility of 67.17% for options expiring Nov 03, 2023 (2 days).

This is showing a smirk, option volatility smirk around earnings reflects the market's anticipation of greater price uncertainty and the possibility of significant price movements during and after earnings reports.

I feel that we can use this information to make informed decisions about the options we trade, such as using strategies that take advantage of elevated implied volatility or protecting the positions from large price swings.

Summary

From what I have observed, there are some challenges Apple face in the product launch in the last quarter, and we can see that in the last quarter, implied volatility dropped to 21.4 from 25.3, resulting in an implied volatility crush of 15%. 5 days after earnings, the 30 day IV was 19.8.

Apple share price did drop when the IV dropped. This is something I would be looking out for, if there is any changes coming on actual earnings release date.

Appreciate if you could share your thoughts in the comment section whether you think Apple share price would pick up if we could see IV increases or we need to see a better-than-expected revenue and earnings per share.

@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.