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Option Traders Divided On Apple Inc. (AAPL)

Speculators are targeting Apple Inc. options that expire this Friday

by 8/27/2014 10:42 AM
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Apple Inc. (NASDAQ:AAPL) allegedly plans to release a 12.9-inch iPad next year, according to recent reports, and speculation continues to swirl around the anticipated September debut of the iPhone 6. However, there's been little reaction to the news today, with the shares sitting just a nickel higher at $100.94. In the tech name's options pits, meanwhile, short-term contracts are in demand. Specifically, AAPL's 30-day at-the-money implied volatility is 1.4% higher at 22.9%, and nine of the 10 most active options expire at this Friday's close.

Grabbing an early lead is the weekly 8/29 102-strike call, which is seeing a mix of sell- and buy-to-open activity. The call writers are gambling that AAPL will remain below $102 through the end of the week, allowing the contracts to expire worthless, and the traders to retain the initial premium collected as their maximum potential reward. However, should the shares topple the strike, the sellers could be at risk of assignment, and face theoretically unlimited losses.

Conversely, the weekly call buyers believe AAPL will hurdle the $102 mark. Specifically, they will profit at expiration if the stock is sitting north of $102.22 -- the strike plus the volume-weighted average price of $0.22 -- with theoretically unlimited gains from that point forward. If the shares end the week below $102, the most the traders will forfeit is the initial premium paid.

On the charts, it's been a solid year for Apple Inc. (NASDAQ:AAPL), which is up roughly 26% in 2014. More recently, the equity found a foothold atop the century mark, and hit a record high of $102.17 on Monday.


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