Best FAANG Stock for Summer

AAPL options traders have been buying to open puts at a quick clip

May 29, 2019 at 11:57 AM
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Apple Inc. (NASDAQ:AAPL) peaked at $215.31 on May 1, marking its highest point since Nov. 7. The shares of the iPhone maker have since shed nearly 18% -- set to snap their four-month winning streak -- amid increasing U.S.-China trade tensions. However, if history is any guide, the FAANG stock could be ready to bounce back this summer.

According to Schaeffer's Senior Quantitative Analyst Rocky White, AAPL has been one of the best stocks to own on the S&P 500 Index (SPX) during the June-through-August period. Specifically, over the past 25 years, the stock has averaged an 11.6% gain over the three-month period -- the second-highest on the list -- boasting a 76% win rate. Based on its current perch at $176.97, another move of this magnitude would have Apple shares trading near $200 by Labor Day.

apple stock daily price chart on may 29

Skepticism toward Apple stock among options traders has surged in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.00 ranks in the 100th annual percentile, meaning puts have been bought to open over calls at an extreme clip.

Echoing this, AAPL's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) rests at a top-heavy 1.43, indicating near-the-money puts outweigh near-the-money calls in the front three-months' series of options. This could create tailwinds for the security, as the hedges related to these bets begin to unwind.

Plus, there's the potential for upgrades to draw buyers to Apple's table, should the FAANG stock stage another summer rally. Although the average 12-month price target of $213.86 is a healthy 20% premium to current levels, 12 of 26 analysts maintain a lukewarm "hold" rating on the equity.

 

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