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Most Active Options Update: Apple Inc. (AAPL)

Short-term Apple Inc. option traders eye an extended trek into annual-high territory

by 5/27/2014 1:05 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). Falling off the list since last time were AstraZeneca plc (ADR) (NYSE:AZN), Molycorp Inc (NYSE:MCP), and Exxon Mobil Corporation (NYSE:XOM).

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Apple Inc. rallied to a fresh annual peak of $621.65 earlier, following reports that the company may be unveiling new smart-home technology at its Worldwide Developer Conference next month. Option traders are responding positively to the upward momentum, scooping up calls at a 57% mark-up to the average intraday pace. Short-term contracts are in high demand, as the equity's 30-day at-the-money implied volatility (IV) has shot 11.7% higher to 20.6%, and is lingering near levels not seen since late April.

The most active AAPL option thus far is the weekly 5/30 620-strike call, where a healthy portion of the 19,625 contracts traded have done so at the ask price, pointing to buyer-driven activity. IV has surged 5.8 percentage points, and volume outstrips open interest, suggesting the initiation of new positions.

With AAPL lingering near $621.02, these calls are currently in the money. However, based on the volume-weighted average price (VWAP) of $4.70, at-expiration breakeven is $624.70 (strike plus VWAP). Gains on the play are theoretically unlimited with each step north of this mark Apple Inc. (NASDAQ:AAPL) takes by week's end, which is when the options expire. The last time the security saw the north side of this level was Oct. 24, 2012. Should the stock fail to be perched atop the strike price at Friday's close, the most the speculators stand to lose is the initial premium paid.

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