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Most Active Options Update: Apple Inc. (AAPL)

One Apple Inc. option trader took a conservative approach to bet on new highs

by 8/15/2014 2:33 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest options volume during the past 10 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), as one trader rolls the dice on a slow churn higher over the next several weeks.

Most Active Options Table

After hitting a fresh 52-week peak of $99.44 in late July, shares of AAPL entered a brief period of consolidation. However, a sharp bounce off its 40-day moving average last Friday helped the security resume its longer-term uptrend, with AAPL last seen lingering near $97.45. Against this backdrop, one modestly bullish bettor today is gambling on the stock to hit another technical milestone in the near term, but is bracing for resistance near the century mark.

Shortly after the open, one massive block of 20,228 weekly 9/12 101-strike calls was sold for $1.17 apiece, while a 10,114-contract lot of weekly 9/12 97-strike calls was simultaneously bought for $2.89 each, resulting in an initial net debit of $0.55 ($2.89 - [$1.17 *2]) per trio of calls. Data from the International Securities Exchange (ISE) confirms the initiation of new positions.

By implementing the call ratio spread, this trader was able to reduce her cost of entry by collecting premium on the sold calls. However, she is also incurring more risk, compared to initiating a long call spread, as half of the short calls remain uncovered. In other words, if AAPL rallies past $101 -- uncharted territory for the equity -- over the next four weeks, she could be at risk of assignment, and face theoretically unlimited losses. However, should AAPL settle south of $97 at expiration, the most she stands to lose is the initial net debit of $0.55.

On the reward side, the speculator stands to profit if the stock expires anywhere between the lower breakeven rail of $97.55 (bought strike plus net debit) and $101. Ideally, though, she wants Apple to settle squarely at $101 at the close on Friday, Sept. 12, which will allow her to pocket the maximum potential reward of $3.45 (difference between the strikes less the net debit).

On the fundamental front, Apple Inc. (NASDAQ:AAPL) announced today it has started using data centers in China to store the personal information of some if its Chinese users. This is a first for the tech titan, with hopes that it will improve the service capacity of its iCloud.


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