Apple Inc. (AAPL) Options Heat Up as Stock Ices Dow

Apple Inc. (AAPL) puts are more popular than usual amid the stock's retreat

Dec 9, 2015 at 3:10 PM
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Apple Inc. (NASDAQ:AAPL) is leading the Dow lower, down 2.5% at $115.29, and offsetting big-cap M&A buzz that had the blue-chip index up more than 100 points this morning. Pressuring the Silicon Valley juggernaut are reports that it's pressing pause on plans for a live Internet-based TV service. Against this backdrop, AAPL put options are trading at an accelerated clip.

Roughly 222,000 AAPL puts have crossed the tape so far -- 1.4 times the average put volume at this point in the session. At a glance, it looks like some speculators are buying to open the December 115 put, amid expectations for AAPL to slide beneath the strike through next Friday's close, when front-month options expire.

AAPL's short-term options can be had at a relative discount. The stock's Schaeffer's Volatility Index (SVI) of 21% stands higher than just 14% of all other readings from the past year, suggesting historically modest volatility expectations.

From a broader standpoint, AAPL calls have been the options of choice among "vanilla" buyers. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio sits at 1.97. In other words, traders have bought to open almost two AAPL calls for every put during the past two weeks.


Still, current call open interest on AAPL remains relatively depleted. About 3.54 million AAPL calls are open right now -- a number that's been lower just 5% of the time during the past year. In the December series, the overhead 120 strike is home to peak call open interest, with nearly 76,000 contracts in residence.

In fact, the round-number $120 level has contained Apple Inc.'s (NASDAQ:AAPL) recent rebound attempts, and is home to the equity's descending 32-week trendline -- a moving average not toppled on a weekly closing basis since late July. Against this backdrop, the $120 region could remain a troublesome spot for AAPL, should the equity attempt a rebound in the near term.

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