Is It Time to Buy Apple Inc. (AAPL) Options?

Amid drama with the FBI, Apple Inc. (NASDAQ:AAPL) option traders are upping the bearish ante -- and getting a good deal

by Kirra Fedyszyn

Published on Feb 25, 2016 at 12:34 PM
Updated on Jun 24, 2020 at 10:16 AM

Apple Inc. (NASDAQ:AAPL) CEO Tim Cook spoke to ABC News last night, bringing to light more details of his thoughts in the ongoing struggle between the company and the FBI. Amid the standoff, AAPL option traders have been upping the bearish ante -- and getting a relatively good deal, too.  

First, a quick background on the news. The feds ordered AAPL to hand over a master key that would allow them to access data from the phone of Syed Rizwan Farook, the shooter in December's San Bernardino attack. But so far, Cook has refused to comply, and even said the government should withdraw the court order. As it stands, the company has until tomorrow to officially counter the order, and a hearing on the matter is scheduled for late March.

While opinions have been publicized from all sides -- from presidential hopeful Donald Trump to victims of the San Bernardino shootings -- the tug-of-war hasn't had an especially strong impact on the stock. AAPL had already pulled back significantly since early December, with the shares closing below the century mark in January for the first time in more than a year . Since the beginning of 2016, Apple Inc. has closed above $100 only twice.

Looking to the options pits, pessimism is mounting toward AAPL. Specifically, the stock's 10-day put/call volume ratio of 0.93 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is in the top percentile of its annual range. That means traders haven't bought to open AAPL puts over calls at such an extreme rate any time in the past year.

And for short-term traders looking to get in on the action, now is a prime opportunity. The equity's Schaeffer's Volatility Index (SVI) of 24% is in just the 18th percentile of all readings from the past year, meaning that near-term options on Apple Inc. (NASDAQ:AAPL) are attractively priced at the moment, historically speaking.

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