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Apple Inc. (AAPL) Retreat Sparks a Run on Put Options

Apple Inc. skeptics are purchasing soon-to-expire puts

by 1/29/2014 11:37 AM
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Option Brief: While activist investor Carl Icahn remains confident in Apple Inc. (NASDAQ:AAPL), option traders today are gambling on more short-term downside for the beleaguered equity. Already, AAPL has seen roughly 112,000 puts cross the tape -- a 62% mark-up to its average intraday put volume. The bearish betting marks a change of pace for AAPL, as the stock's 10-day call/put volume ratio of 1.87 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) rests in the 68th annual percentile, pointing to a healthier-than-usual appetite for long calls of late.

Digging deeper into today's data, we find the weekly 1/31 500-strike put is the most popular, with nearly 17,600 contracts exchanged. Volume has exceeded open interest at the strike, and the majority of the puts traded on the ask side, hinting at buy-to-open activity. Furthermore, implied volatility was last seen 4.2 percentage points higher, underscoring the elevated demand for the round-number contracts.

By purchasing the puts to open, the buyers expect Apple Inc. (NASDAQ:AAPL) to extend its post-earnings retreat through Friday's close, when the options expire. More specifically, the investors are betting on the shares to breach $500, at which point the puts will move into the money. At last check, AAPL has surrendered 0.6% to trade at $503.49, after falling as low as $498.62 in early action. A close south of the mid-millennial mark would be a first since mid-October.


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