The Large-Cap Mystery Being Overshadowed By Meme Stocks

AAPL call buyers remain unfazed, though

Managing Editor
Jun 11, 2021 at 9:37 AM
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Cryptocurrency and so-call "meme" stocks have been all the rage over the past few months. However, while the crypto and Reddit buzz took home the headlines, big-name FAANG stocks such as Apple Inc (NASDAQ:AAPL),  Alphabet Inc (NASDAQ:GOOGL), and Netflix Inc (NASDAQ:NFLX), were seeing their own noteworthy market moves. Specifically, right now the market is littered with "Large Cap" companies that are in fact down year-to-date (YTD). In focus today is AAPL, which as of Friday has shed 6% YTD. The last time the equity shed this much year-to-date by the month of June, was in 2016.

The main finding that seems strange to me is that meme stocks seem to move up around 10% per day, every day, on average. This happens while larger cap household names – titans of their industry that ultimately support the fundamentals of the market -- have struggled and are down year-to-date.

Marketcapytd

For example, Apple has spent very little time this year in positive territory, per the chart below. This suggests there is underlying weakness in the market and that the "fast money" has flipped from cryptocurrency to small-cap meme stocks. However, it is yet to be determined if investors will rekindle their love for large-cap tech names that led the market out of the Covid-19 quarantine.

DailyAAPLCotW

Regardless of AAPL’s next move, it’s been a bit of a feeding frenzy in the equity's options pits. The stock just popped up on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that attracted the most option volume during the past 10 days. According to White, 1,417,825 calls and 659,470 puts were exchanged. The two most popular contracts during this time period were the weekly 5/28 127-strike call and the May 130 call.

Now seems like a good opportunity to weigh in on Apple stock's next move with options. The security's Schaeffer's Volatility Index (SVI) of 23% stands in the 15th percentile of its annual range, indicating options players are now pricing in low volatility expectations. Lastly, the security's Schaeffer's Volatility Scorecard (SVS) ranks at 83 out of 100, implying the stock tends to outperform these volatility expectations -- a boon for option buyers.

Beyond Apple stock’s own technical setup, the way its lagging behind the jumpier names of 2021 reflects the broader rotation out of tech names. Whether this relationship between Reddit darlings and tech heavyweights such as AAPL maintain their seemingly inverse nature, will be something for investors to watch in the second-half of 2021.

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, June 6.

 

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