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Apple Inc. (AAPL) Option Players Eye Higher Highs

Apple Inc. option speculators expect more upside this week

by 8/20/2014 10:35 AM
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Apple Inc. (NASDAQ:AAPL) calls are trading at more than twice the rate of puts this morning, with speculators gambling on the tech titan's end-of-week trajectory. In light of the stock's newly tagged post-split high of $100.77, hit out of the gate this morning, traders have taken a shine to the weekly 8/22 100- and 101-strike calls.

Implied volatility (IV) on the 100-strike call has jumped 2.3 percentage points, reflecting the growing demand for century-mark contracts. Digging deeper, the option has seen a mix of buyer- and seller-driven volume, with the latter likely due to traders taking profits in the wake of AAPL's new high.

Those buying the calls to open have done so at a volume-weighted average price (VWAP) of $0.81, which represents their maximum risk, should AAPL finish the week in double-digit territory. Friday's at-expiration breakeven, meanwhile, stands at $100.81 (strike plus VWAP) -- in uncharted territory for the shares -- with profit theoretically unlimited north of here. Delta on the call stands at 0.53, implying a roughly 1-in-2 chance of finishing in the money at Friday's close, when the weekly options expire.

IV on the 101-strike call was last seen 1.4 percentage points higher, and buyers have initiated positions at a VWAP of $0.34. As such, they'll make money if AAPL is sitting above $101.34 -- pointing to expectations for even higher highs -- at Friday's close. Risk is limited to the initial premium paid for the calls, should AAPL fail to topple $101 by week's end. Delta on the call rests at 0.26, suggesting a slightly greater than 1-in-4 shot of expiring in the money.

After touching the aforementioned peak of $100.77 in early trading, the shares of Apple Inc. (NASDAQ:AAPL) have turned tail amid reports of an iWatch delay, giving up 0.4% to wink at the $100.09 level. Today's appetite for bullish bets is nothing new, though, as the stock's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.55 -- higher than 86% of all other readings from the past year. In other words, option buyers have scooped up AAPL calls over puts at a much faster-than-usual clip during the past two weeks.


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