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Option Brief: Apple Inc. (NASDAQ:AAPL) is down 1.7% at $522.66, as tech stocks extend Friday's slide. Nevertheless, options traders are wagering on a short-term bounce for the Silicon Valley sultan, as evidenced by today's affinity for weekly call options.
So far today, AAPL has seen roughly 141,000 calls cross the tape, compared to about 99,000 puts. Eight of the 10 most active options expire at Friday's closing bell, and the stock's 30-day at-the-money (ATM) implied volatility (IV) has jumped 8.3% to 28.4%, echoing the growing demand for short-term options.
Most popular is the weekly 4/11 540-strike call, where more than 10,800 contracts have traded. IV is trending higher at the strike, and volume has surpassed open interest, pointing to fresh positions. Plus, a healthy portion of the calls crossed on the ask side, hinting at buyer-driven volume.
The calls traded at a volume-weighted average price (VWAP) of $0.84, suggesting the buyers will profit if AAPL is sitting north of $540.84 (strike plus VWAP) at Friday's close, when the options expire. From the stock's current perch, it would take a 3.5% rebound in order to hit breakeven. Risk is limited to the initial premium paid for the calls, should AAPL remain south of the strike through the option's lifetime.
In light of Apple Inc.'s (NASDAQ:AAPL) retreat -- the stock is in danger of closing beneath its lower Bollinger Band for the first time since late January, when the shares were flirting with year-to-date lows -- delta on the calls has plummeted to 0.09 from 0.28, implying a less than 1-in-10 shot of an in-the-money finish. However, while the equity's 30-day ATM IV is ticking higher, the stock's Schaeffer's Volatility Index (SVI) of 23% sits just 6 percentage points from an annual low. In other words, AAPL's short-term options remain relatively cheap, from a historical perspective.