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Apple Inc. (AAPL) Option Trader Places a $57 Million Bet

An aggressive Apple Inc. call buyer is targeting the October series

by 6/4/2014 2:31 PM
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Option Brief: Apple Inc. (NASDAQ:AAPL) notched yet another annual high today, hitting $647.89 less than an hour ago. At last check, the shares were up 1.3% at $645.95. Meanwhile, option traders are scooping up AAPL options at a quicker-than-usual pace. As such, the stock's 30-day at-the-money implied volatility is 10.4% higher at 22.5%, signaling elevated demand for short-term contracts.

Nevertheless, the two biggest trades in AAPL's options pits today occurred in the further-dated October series. Around 10 a.m. ET, blocks of 20,000 October 675 calls and 10,000 October 700 calls were exchanged. According to a floor source cited by Trade-Alert, the positions were bought to open by the same trader, who paid a premium of $21.30 per contract and $14.75 per contract, respectively, at the two strikes.

Therefore, at-expiration breakeven for the lower-strike call is $696.30 (strike plus premium), while breakeven for the higher-strike call is $714.75. The trader will rack up additional profits the higher AAPL is sitting above the two marks at the close on Friday, Oct. 17, when the options expire. However, if the contracts remain out of the money through expiration, the buyer will forfeit the initial premium paid -- which totals more than $57 million ([$21.30 premium * 20,000 contracts * 100 shares per contract] + [$14.75 premium * 10,000 contracts * 100 shares per contract]) -- assuming he's still hanging onto the calls.

As alluded to earlier, Apple Inc. (NASDAQ:AAPL) has been in rally mode of late, and is up a healthy 15% in 2014. However, the shares haven't traded above either $675 or $700 since October 2012. As such, delta on the 675- and 700-strike calls rests at just 0.41 and 0.31, respectively.

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