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Apple Inc. (AAPL) Call Players Target the Century Mark

Apple Inc. came within a stone's throw of toppling the century mark today

by 7/28/2014 2:36 PM
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Apple Inc. (NASDAQ:AAPL) rallied to a new annual peak of $98.93 earlier, but was more recently seen up 1.2% to linger near $98.86. Helping stoke today's bullish flames were a rumored acquisition, as well as the European Union's regulatory approval of AAPL's $3 billion purchase of Beats Electronics. While today's technical milestone has short-term call players targeting the century mark, not everyone is doing so in the traditional "vanilla" sense.

Specifically, the weekly 8/1 100-strike call is the most active AAPL option today, with 39,707 contracts on the tape at last check. This volume has been fairly evenly split between the bid and the ask prices, and volume outstrips open interest -- collectively pointing to a mix of selling- and buying-to-open activity, respectively.

By selling to open the calls, the traders expect AAPL to be sitting in double-digit territory at week's end. In this best-case scenario, the calls will expire worthless, and the speculators can retain the initial credit collected as their full potential reward. Conversely, a move into triple digits by Friday's close could put the call writers at risk of assignment, and facing theoretically unlimited losses.

Meanwhile, by purchasing to open the options for a volume-weighted average price (VWAP) of $0.31, the call buyers are hoping AAPL is sitting north of breakeven at $100.31 (strike plus VWAP) at week's end. Gains will accumulate north of here, while risk is capped at 100% of the premium paid, should Apple Inc. (NASDAQ:AAPL) finish the week south of the century mark. At last check, delta on the call was docked at 0.28, suggesting a slim 28% chance the call will be in the money at Friday's close.


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