Options Traders Flock to Struggling AAPL After Earnings

Analysts are still overwhelmingly optimistic on the tech behemoth

Deputy Editor
Oct 30, 2020 at 11:45 AM
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Apple Inc. (NASDAQ:AAPL) entered the earnings confessional today, and reported fiscal fourth-quarter adjusted earnings of 73 cents on revenue of $64.70 billion, both of which easily beat Wall Street's estimates. Despite this, the shares of APPL are plunging, last seen down 4.7% to trade at $109.90, while the company reported a 21% drop in iPhone sales.

Still, analysts seem rather bullish on the tech behemoth, and at least two have chimed in with price-target hikes already today, with those being D.A. Davidson and Raymond James. The larger of the two comes from the latter, who raised their price target to $140 from $120. Coming into today, 19 brokerages covering AAPL called it a "buy" or better, while the remaining four recommended a tepid "hold." Plus, the 12-month consensus price target of $122.46 is a 10.2% premium to last current levels.

Today's negative price action has the equity trading below $110 for the first time in just over a month. It also puts the stock in a situation concerning a trendline that was keeping an eye on pullbacks. Specifically, Apple stock just fell below its 80-day moving average for the second time this week. Longer term, however, AAPL is up nearly 50% in 2020.

AAPL Chart October 30

In the options pits, its calls that are ruling the roost. Apple stock sports a 50-day call/put volume ratio of 2.27 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) that sits higher than 94% of all other readings from the past year. This ratio implies a healthier-than-usual appetite for long calls of late.

Today, options traders are taking a greater-than-usual interest in the Big Tech staple. Options are trading at double the average intraday amount -- with volume pacing in the 99th percentile of its annual range -- with new positions being opened at the weekly 10/30 110-strike put and 112-strike call from the same series.

Lastly, now looks like an affordable time bet on AAPL with options. This is per the stock's Schaeffer's Volatility Index (SVI) of 48%, which sits higher than 31% of all other annual readings. What’s more, Apple stock’s Schaeffer's Volatility Scorecard (SVS) ranks at a high 97 out of 100, meaning the security has tended to exceed these expectations during the past year -- a boon for premium buyers.


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