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Can Apple Inc. (AAPL) Extend Its Uptrend?

Apple Inc. fans are purchasing calls that expire on Friday

by 3/26/2014 11:53 AM
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Option Brief: Apple Inc. (NASDAQ:AAPL) is trading 0.5% higher to flirt with $547.84, bringing its week-to-date gain to 2.8%, and positioning the stock for its second straight close north of its upper Bollinger Band. What's more, options traders are gambling on even more upside for AAPL -- which is reportedly in talks with Comcast Corporation (NASDAQ:CMSCA) for a joint streaming-TV venture -- through the end of the week.

So far today, the iPhone parent has seen roughly 85,000 calls cross the tape -- a 15% mark-up to its average intraday call volume. For comparison, around 58,000 puts have changed hands. Meanwhile, the stock's 30-day at-the-money implied volatility (IV) is 4.1% higher at 20.8%, implying AAPL's short-term options are once again in demand.

Most active is the equity's weekly 3/28 550-strike call, where close to 15,000 contracts have traded. A healthy portion of the calls crossed on the ask side, IV is edging higher, and volume has outstripped open interest at the strike -- all signs of newly bought bullish bets.

By purchasing the calls at a volume-weighted average price (VWAP) of $2.05, the buyers will profit if AAPL is north of $552.05 (strike plus VWAP) -- in territory not charted since late January -- when the options expire at Friday's closing bell. Delta for the calls stands at 0.40, implying a roughly 40% shot of an in-the-money finish. Risk, however, is capped at the initial premium paid for the contracts, should AAPL fail to topple the strike.

The good news for the call buyers: Apple Inc.'s (NASDAQ:AAPL) Schaeffer's Volatility Index (SVI) of 17% sits just 2 percentage points from a 52-week nadir. Simply put, the equity's short-term options are a bargain right now, from a volatility standpoint, even after today's IV pop.


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