Spread Traders Take a Shine to Apple Inc. (AAPL)

Apple Inc. (AAPL) options volume is running at twice the normal intraday rate

Apr 18, 2016 at 2:14 PM
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While the Dow is trading higher, blue chip Apple Inc. (NASDAQ:AAPL) is dampening the enthusiasm, down 2% at $107.55 -- the worst-performing Dow component this afternoon. No specific catalyst is responsible for the headwinds, though speculation is heating up about an all-glass iPhone 8 in 2017. Amid it all, AAPL options volume has been kicking into overdrive.

Starting in on the options activity, intraday volume is running at roughly twice the usual pace, and a number of huge blocks have crossed. The biggest involved twin lots of 100,000 contracts at the weekly 4/29 110-strike call and put. Meanwhile, Trade-Alert is making much out of a five-legged spread trade that centered on the May 97.50, 110, and 118 calls, as well as the May 95 and 102 puts. Plus, it looks like 9,200 short call spreads are being initiated at Apple's May 117 and 118 strikes for $0.14 apiece, or nearly $130,000 (premium received * number of contracts * 100 shares per contract).

Taking a step back, short-term calls have been the options of choice on AAPL, ahead of next Monday's earnings report. Specifically, the stock's Schaeffer's put/call open interest ratio (SOIR) sits at 0.71, with calls outweighing puts among options with a shelf-life of three months or less. More significantly, the SOIR ranks in the low 22nd percentile of its annual range, confirming the call bias.

Elsewhere, brokerage firms have taken a sunny-side-up approach toward AAPL. Of the 31 analysts rating the stock, 26 have handed out a "buy" or better endorsement. Plus, Apple's consensus 12-month price target checks in at $133.92, or almost 25% above current trading levels.

On the charts, Apple Inc. (NASDAQ:AAPL) has been in rebound mode since bottoming out around $93 in January and February -- and is now safely in triple-digit territory. However, the stock just gapped below its 20-day moving average, below which it hasn't closed since late February. Going forward, traders may want to keep an eye on the underfoot 120-day trendline, which could act as support, but more recently pressured the shares in March and late 2015.

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