Most Active Options Update: Apple Inc. and 3D Systems Corporation

Are Apple Inc. (AAPL) and 3D Systems Corporation (DDD) traders using options to hedge?

Oct 23, 2015 at 12:24 PM
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The 20 stocks listed in the table directly below have attracted the highest total options volume during the past 10 trading days. Below that are the 20 mid-cap stocks that have generated the highest total options volume during the past two weeks. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are tech titan Apple Inc. (NASDAQ:AAPL) and 3-D printer manufacturer 3D Systems Corporation (NYSE:DDD).

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AAPL is 2.5% higher at $118.34 -- and on pace to end the week atop its 20-week moving average for just the second time since mid-June -- as a round of solid big-cap tech earnings provides a halo lift. In fact, Apple will take its turn in the earnings confessional early next week. Meanwhile, traders are also digesting some analyst attention, as Citigroup removed AAPL from its U.S. Focus List, while Maxim upgraded the stock to "buy" from "hold" and hiked its price target to $167 from $144 -- in uncharted territory.

Today, AAPL calls are running at twice the average intraday clip, with eleventh-hour betting going down at several weekly 10/23 strikes -- which make up the top five most active contracts thus far. Prior to today, though, speculators were scooping up AAPL puts over calls at a faster-than-usual clip. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 0.58 stands higher than 69% of all other readings from the past year.

The equity's deep out-of-the-money November 100 put saw open interest increase by more than 16,000 contracts during the past two weeks. A healthy portion of the puts were bought to open, meaning traders are either betting on or hedging against a retreat into double-digit territory by the close on Friday, Nov. 20, when front-month options expire.

Should Apple Inc. (NASDAQ:AAPL) follow its sector peers and report stronger-than-expected earnings next week, a change of heart among option bears could translate into added gains for the shares.

DDD has shed 10% to sit at $11.03 -- bringing its year-to-date deficit to a cool 66.4% -- after Jefferies sliced its price target by $1 to $11. As such, the stock is on the short-sale restricted list, but it appears bears are heading to the options pits.

Intraday put volume is running at three times the normal pace, with apparent buy-to-open action spotted at the weekly 11/6 10-strike put. By purchasing the puts to open, the buyers are expecting DDD to backpedal into single-digit territory -- and into a neighborhood not explored in almost four years -- by the close on Friday, Nov. 6, when the options expire. This shelf life encompasses DDD's expected Nov. 4 turn in the earnings spotlight.

During the past 10 weeks, however, long calls have been more dominant than usual. The equity's 50-day call/put volume ratio on the ISE, CBOE, and PHLX sits at 2.21 -- higher than 80% of all other readings from the past year. Echoing that, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.81 sits just 3 percentage points shy of a 52-week low, suggesting near-term traders have rarely been more call-biased. 

The out-of-the-money January 2016 15-strike call saw the biggest open interest influx during the last 10 sessions, with nearly 4,000 contracts added. Traders who bought the calls to open are either gambling on a notable rebound north of $15 -- which has acted as a roadblock over the past couple of months -- by January options expiration, or they're hedging their short positions

In fact, short interest accounts for nearly a third of 3D Systems Corporation's (NYSE:DDD) total available float. At the security's average pace of trading, it would take nearly 16 sessions to buy back these bearish bets.

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