Looking at AAPL May puts. The IV is in the 30s but I expect it to crash post earnings. Is there any strategy that can let me lower the cost of the put to hedge against my long stock so I won't lose too much premium on the put if the stock ramps? Thanks!
Since you already own the stock you could collar it, buy puts to protect the downside and sell calls to pay for the puts. You would be giving up the upside potential. If it really tanks you can sell the puts and buy more stock.
In order to get something you have to give up something. Collaring is the simplest answer. Overwriting or adding bearish call spreads is the next level but comes with an add'l set of complications. And of course, there's always getting out of the way of earnings.
Do you have some value below which you feel AAPL will *not* go? If so, make your put a bear put spread. If you're very, very confident, make it a put ratio spread. (Sell more than one far OTM put for every put bought.) You can reduce your costs pretty far that way, at the risk of losing money if AAPL really tanks. The short side of the ratio spread should also benefit from the volatility crush.
I'd lean toward ratioing to the upside (OTM calls and/or call spreads) because if AAPL tanks, he's losing on the stock down to strike and possibly a lot more on the naked puts. To the upside, there's a decent stock gain until the short call strike is reached and above that, he gives up profit. I'd rather give up gains than lose immediately There's no perfect answer. You have to go with what you feel comfortable with.
Actually the May IV probably won't crash much. The APR4 vols are around 60 today (were in the mid-50s yesterday before S&P downgraded the US), I think 30 is probably about normal for Apple.