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Most Active Options Update: Apple Inc. (AAPL)

Eleventh-hour option bulls are circling Apple Inc.

by 7/23/2014 11:51 AM
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 today is Apple Inc. (NASDAQ:AAPL), which has attracted a fresh crop of post-earnings option bulls.

Most Active Options Table

Apple Inc. is 3% higher at $97.55, and earlier touched a split-adjusted annual high of $97.88, as Wall Street applauds the tech titan's turn in the earnings spotlight. The company said gross margin rose to 39.4% in the fiscal third quarter, from 36.9% in the year-ago quarter. Meanwhile, speculators are optimistic about the company's prospects in China, its recent deal with International Business Machines Corp. (NYSE:IBM), and its new iPhone, slated for release later in the year.

Around midday, AAPL has seen nearly 920,000 calls change hands -- three times the average intraday rate, and more than twice the number of puts exchanged. Volume has surpassed open interest at the top three strikes -- the weekly 7/25 97- and 98-strike calls, and the September 105 call -- pointing to new initiations. Plus, a healthy portion of the aforementioned calls traded on the ask side, suggesting they were bought.

The volume-weighted average price (VWAP) of the weekly 97-strike calls is $0.68, meaning the buyers will reap a reward if AAPL is docked atop $97.68 (strike plus VWAP) at Friday's close, when the options expire. In fact, the buyers' profit potential is theoretically unlimited north of breakeven, while risk is capped at the initial premium paid, should the contracts expire out of the money. Delta on the at-the-money call has surged to 0.64 from 0.34 at yesterday's close, implying a nearly 2-in-3 shot of an in-the-money (ITM) finish.

Likewise, the VWAP of the 98-strike calls is $0.43, making at-expiration breakeven $98.43. Delta on the call has edged higher to 0.35, from 0.28 last night, pointing to a 35% chance of an in-the-money close on Friday.

While the September 105 call is out of the money, its VWAP is $0.79, due to added time value. In other words, the buyers expect Apple Inc. (NASDAQ:AAPL) shares to muscle into triple-digit territory by the close on Friday, Sept. 19, when back-month options expire, and will reap a reward if the stock is perched atop $105.79 -- which would represent a new record high. The options market is giving the calls a 1-in-5 shot of expiring in the money, as delta stands at 0.20, compared to 0.16 at Tuesday's close.


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