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Apple Inc. (AAPL) Speculators Stare Down $600

Apple Inc. (AAPL) options traders are selling short-term 600-strike calls today

by 4/29/2014 11:44 AM
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Option Brief: Out of the gate, Apple Inc. (NASDAQ:AAPL) hit another 52-week high of $595.98, amid news of a newer (and cheaper) version of its MacBook Air ultra-slim notebook computer. (Since then, however, the stock has dipped slightly to $592.18.) In response, options players have come out to play, sending Apple to the top of the most active charts. Total option volume is currently running at more than double the normal intraday pace, with about 194,000 calls and 134,000 puts on the tape so far.

Most active is the weekly 5/2 600-strike call, but options traders aren't necessarily betting on a breakout above this round number. Rather, the majority of the more than 14,000 contracts traded here have gone off at the bid price. Volume exceeds open interest by a healthy margin, and implied volatility has moved modestly higher at the strike, which are signs that together point to sell-to-open activity.

These call sellers are hoping AAPL will continue to tread water below the $600 level through this Friday's close, when the weekly options expire. Should the stock be south of $600 at Friday's closing bell, the traders would keep the entire premium collected -- the volume-weighted average price of $3.08 -- as the calls expire worthless. In what is unwelcome news for premium sellers, short-term Apple options are relatively inexpensive now, from a volatility perspective. The stock's Schaeffer's Volatility Index of 22% is lower than 70% of comparable readings taken during the last 12 months.

On the flip side, if Apple Inc. (NASDAQ:AAPL) manages to overtake $600 in the next four sessions, the call sellers could be assigned, and forced to sell Apple shares for $600 apiece, no matter where they might be trading at the time. The stock's last venture above the $600 century mark occurred in November 2012.


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