Is Apple's Latest 'Run Away Success' Reason to Buy Calls?

Apple Inc. (AAPL) has had a "great holiday," and now the stock is verging on a bullish cross

Alex Eppstein
Dec 28, 2016 at 2:07 PM
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Apple Inc. (NASDAQ:AAPL) is off 0.3% this afternoon at $116.86, despite positive buzz on the fundamental and technical fronts. First off, CEO Tim Cook told CNBC "it's been a great holiday," adding that the company's new Airpod headphones are a "run away success." In addition, UBS called AAPL the "most underweight stock in the world."

Technically speaking, there are some encouraging signs from the stock. While the shares have struggled to overtake the $118 area in recent months, they remain relatively close to their annual high of $118.69, hit on Oct. 11. What's more, AAPL's 10- and 20-month moving averages are on the verge of making a bullish cross for the first time since mid-2014.

aapl monthly dec 28

There are plenty of options traders counting on an extended upside run for Apple shares, too. The stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.86 stands in the high 79th annual percentile, with long calls nearly doubling puts.

Outside of the options arena, positivity is high, while doubters have been on the run. Specifically, 26 of 32 analysts rate AAPL a "buy" or better. Plus, short interest plummeted almost 22% in the most recent reporting period, leaving less than 1% of the stock's float sold short.

For those looking to place short-term bets on AAPL -- whether bullish or bearish -- now's an excellent time to buy options premium. The stock's Schaeffer's Volatility Index (SVI) of 16% sits below 97% of all readings from the past year, hinting at muted volatility expectations in the front-month series. Not to mention, Apple Inc.'s (NASDAQ:AAPL) Schaeffer's Volatility Scorecard (SVS) is a sky-high 99, suggesting the stock has made outsized moves in the past year, relative to what the options market has priced in.

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