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Eleventh-Hour Apple Inc. (AAPL) Bulls Bet On a Bounce

Apple Inc. call volume accelerated on Thursday, despite the stock's downturn

by 7/18/2014 9:46 AM
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After tagging a fresh 52-week peak of $97.10 on Wednesday, Apple Inc. (NASDAQ:AAPL) succumbed to broad-market headwinds yesterday. However, AAPL found a foothold in the $93 region -- which coincides with a hefty accumulation of put open interest at the stock's July 92.86 strike -- and closed the session 1.8% lower at $93.09. Despite the security's slip, calls traded at a 57% mark-up to the daily average, and outpaced puts by a nearly 2-to-1 margin. Additionally, the equity's 30-day at-the-money implied volatility (IV) jumped 8.7% to 30.3%, signifying strong demand for short-term contracts.

In fact, all 10 of the most active AAPL options traded yesterday expire at tonight's close. Receiving notable attention was the July 94 call, where 61,292 contracts changed hands. A healthy portion of these did so on the ask side, IV rose 2.1 percentage points, and open interest rose the most of any strike overnight -- all signs of buy-to-open activity.

By purchasing these contracts for a volume-weighted average price (VWAP) of $0.49, the call buyers need AAPL to be sitting north of breakeven at $94.49 (strike plus VWAP) at today's closing bell. Gains are theoretically unlimited north of here, while losses are capped at 100% of the premium paid, should Apple close the session south of the strike price.

Looking ahead, the tech titan is slated to report quarterly earnings after the market closes next Tuesday. Optimism has been growing toward Apple Inc. (NASDAQ:AAPL) ahead of its results, and for the company's fiscal third quarter, Wall Street is calling for a profit of $1.23 per share.


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