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As Apple Inc. (NASDAQ:AAPL) continues to flirt with the $500 mark, options players are betting on further short-term upside. Among the most active strikes trading on Friday was the October 495 call, which was also the site of the weekend's largest open interest addition, with more than 3,000 calls cropping up at the near-the-money strike. Data from the International Securities Exchange (ISE) suggests that a healthy portion of these were purchased to open for a volume-weighted average price (VWAP) of $4.66.
The call buyers are betting on AAPL -- which closed at $492.81 on Friday and is slightly higher on upgrade news to trade at $495.30 -- to finish out the week north of $495. Specifically, in order for the options to be in profitable territory at Friday's closing bell, Apple needs to have muscled above $499.66, or the strike price plus the VWAP. This is a hair shy of the psychologically significant $500 level, above which AAPL has closed just a handful of times since January.
If AAPL is trading below $495 as these options expire, the call buyers stand to lose 100% of the premium paid. From a historical perspective, however, this premium is relatively fair. Implied volatility at the front-month call closed at 20.5% on Friday, compared to the equity's one-month historical volatility of 28.1%.
Apple Inc. (NASDAQ:AAPL) is scheduled to release fiscal fourth-quarter earnings after the close on Oct. 28, after current front-month options have expired. Analysts are targeting a per-share profit of $7.88, down from $8.67 per share earned in the year-ago period.
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