Options Traders Ignore Apple Inc. (AAPL) Ahead of Earnings

The options market is pricing in relatively low volatility expectations ahead of Apple earnings

Jan 27, 2017 at 12:54 PM
facebook twitter linkedin

Apple Inc. (NASDAQ:AAPL) has been remarkably lifeless on the charts lately, as evidenced by the stock's historical volatility stats. According to Trade-Alert, 30-day historical volatility (HV) in AAPL stands at 9.2%, in the 3rd percentile of its annual range -- while the 60-day (15.2%) and 90-day (16.6%) HV readings each rank below 99% of comparable readings over the past year.

The CBOE Equity VIX on Apple (VXAPL) -- which measures the expected short-term volatility on AAPL stock, using the same methodology as the CBOE Volatility Index (VIX) -- is indicative of muted volatility expectations going forward. VXAPL has been meandering lower beneath its 50- and 80-week trendlines for the bulk of the last year, though it's currently at 21.05 -- recovering from a late-2016 dip below its recent "baseline" level of 20.

As for AAPL itself, the stock has spent quite a bit of time trading around the $120 level lately, as the shares had to work to gather enough momentum to launch above this round price point. Nevertheless, the stock on Thursday managed to hit a new annual high of $122.44

aapl 30 minute 0127

Amid AAPL's period of remarkably muted price action, options traders have -- somewhat understandably -- lost interest in the tech giant. Trade-Alert tallies just 3.54 million calls and puts in open interest on AAPL, which ranks in the 1st annual percentile. And the 52-week low in this metric was reached just days ago, on Jan. 23, as open interest on AAPL cratered to 3.18 million contracts following January options expiration.

Of course, action in AAPL shares could pick up after next Tuesday night's earnings report. Over the past eight quarters, AAPL has averaged a post-report daily move of 4.6% -- slightly larger than the 4% swing the options market is currently pricing in, for what it's worth. In other words, options traders might want to start paying attention to the iPhone parent as quarterly earnings approach, since premiums appear reasonable amid the stock's sleepy trek to new annual-high territory.

And speaking of the iPhone -- for the first time in five years, the Apple Inc. (NASDAQ:AAPL) iPhone is not the top smartphone in China. According to Counterpoint Research, the tech giant's market share in the world's second largest economy shrank from 14.3% to 10.4% between 2015 and 2016, and the company "remains in a vulnerable position."

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


Now is the time to join our thriving community of Event Traders who consistently profit from every earnings season. With this discounted subscription opportunity, you'll stay ahead of the curve and seize opportunities others miss. Do not let Q3 earnings season pass you by – subscribe now and supercharge your portfolio with expert insights that turn market reactions into profit-generating opportunities!! Don't waste another second... join us right now before the next trade targeting +200% is released!