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Option Bulls Target Apple Inc. (AAPL)

AAPL fans are flocking to weekly call options

by 2/6/2013 1:11 PM
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The shares of Apple Inc. (NASDAQ:AAPL - 463.10) are blazing a path higher today, and option traders are anticipating even more upside through the end of the week. In early afternoon action, the iPhone maker has seen around 395,000 calls change hands -- a 70% mark-up to its average intraday call volume. For comparison, just about 182,000 puts have exchanged thus far.

Attracting notable attention are the weekly 2/8 460- and 470-strike calls, which have seen about 41,000 and 26,500 contracts traded, respectively. Volume has exceeded open interest at both strikes, and the bulk of the soon-to-expire calls have crossed at the ask price, hinting at newly bought bullish bets.

More specifically, the 460-strike calls have crossed at a volume-weighted average price (VWAP) of $3.83, meaning the buyers' reward will increase the farther AAPL muscles north of $463.83 (strike plus VWAP) through Friday's close. Earlier today, AAPL topped out at $466.50. Meanwhile, the VWAP of the 470-strike calls is $1.47, indicating a breakeven of $471.47 for the buyers. On the flip side, the maximum risk on the long calls is the premium paid at initiation.

At last check, AAPL is up more than 1% to flirt with the $463.10 level -- and trade atop this hurdle. Speaking to The Financial Times, Legg Mason, Inc. (NYSE:LM) fund manager Bill Miller on Tuesday postulated that AAPL could be worth 50% more than its current price. This morning, meanwhile, research firm Canalys said one in six PCs -- including tablets -- shipped in the fourth quarter was an iPad. By their calculations, AAPL took 20% of the PC market share for the first time, with the iPad mini accounting for more than half of the company's total pad shipments.


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