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Most Active Options Update: Apple Inc. (AAPL)

One Apple Inc. spread seller wages on intermediate-term support

by 2/19/2014 1:03 PM
Stocks quoted in this article:

The 20 stocks listed below have seen the highest total options volume during the past 10 trading days. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One stock seeing action from a neutral-to-bullish spread strategist is Apple Inc. (NASDAQ:AAPL).

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Apple Inc. (NASDAQ:AAPL) shares are pulling back from congestion in the $550 area today, and are currently down nearly $9 at $537.20, as rumors continue to swirl about the company's next big venture. Apple is currently the second-most popular equity among today's options traders, with nearly 275,000 contracts on the tape.

One interesting trade reflects the belief that AAPL will have limited downside during the next couple of months. Throughout the morning, symmetrical blocks ranging in size from 70 to 680 contracts traded at the April 485 and 490 puts. Data from the International Securities Exchange (ISE) confirms that the higher-strike puts were sold to open -- for a volume-weighted average price (VWAP) of $3.00 -- while the lower-strike puts were purchased to open for a VWAP of $2.53. The net credit collected for this bull put spread was $0.47 per pair of contracts.

In this strategy, the trader's primary goal is for Apple to hold above the short strike (490) through April options expiration, at which point both puts expire worthless and the spread seller keeps the initial premium collected. Breakeven at expiration is $489.53 (sold strike minus the net credit) -- roughly 9% below current levels -- and the maximum loss is $4.53 (difference between strikes, less the net credit) for each spread, no matter how far Apple Inc. might tumble during the life span of the trade.

The options expire on Thursday, April 17 (due to the Good Friday holiday), which is likely before the company's next earnings report. Scheduled for next Friday, however, is the iPhone parent's annual shareholder meeting.


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