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Most Active Options Update: Apple Inc. (AAPL)

Put and call players pull Apple Inc.'s $540 level into focus

by 4/3/2014 1:40 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is Apple Inc. (NASDAQ:AAPL).


Apple Inc. has been hovering on both sides of $540 for nearly two weeks, and in today's session, the equity was last seen sitting on the south side of this level -- down 0.6% at $539.29. In the stock's options pits, a large number of traders from both the put and the call side are targeting this near-the-money mark, but not everyone is placing their bets in traditional ways.

Receiving notable attention is AAPL's weekly 4/4 540-strike put, where 15,482 contracts have changed hands. A healthy portion of these have traded at the ask price, implied volatility (IV) is up 2.1 percentage points, and volume easily outstrips open interest, collectively pointing to buy-to-open activity. The goal of these put buyers is for AAPL to extend its retreat from the overhead $540 mark. Specifically, breakeven at tomorrow's close is $537.93, or the strike minus the volume-weighted average price of $2.07. Earlier, AAPL hit an intraday low of $537.64.

Meanwhile, the most sought-after position is the weekly 4/4 540-strike call. A hefty percentage of the 16,695 contracts traded here have done so on the bid side, pointing to seller-driven activity. IV is 1.7 percentage points higher, and volume outstrips current levels of open interest, hinting at the initiation of new positions.

Similar to the aforementioned put buyers, the expectation for the call writers is for AAPL to stay below the strike price through tomorrow's close. The difference between the two sets of traders, however, is the risk/reward profile. For the put buyers, risk is limited to the initial premium paid, while their reward will accumulate with each step south AAPL takes all the way down to zero. Risk for the call writers, however, can be quite significant -- should AAPL stage a steep rally through tomorrow's close -- while the maximum potential reward is capped at the initial credit collected.


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