Options Traders Eye $100 Mark Ahead of Apple Inc. (AAPL) Earnings

Some options traders are betting on Apple Inc. (NASDAQ:AAPL) falling below $100 over the next month

by Josh Selway

Published on Apr 25, 2016 at 11:16 AM
Updated on Apr 25, 2016 at 11:17 AM

Put buying has been more popular than normal on Apple Inc. (NASDAQ:AAPL) in recent weeks, as options traders have seemingly tempered their expectations ahead of the company's earnings report tomorrow afternoon. For example, AAPL's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 0.65, putting it in the 71st percentile of its annual range. 

Among the most popular options in today's trading is the May 100 put, and data suggests buy-to-open activity is taking place. If long positions are in fact being initiated here, traders are betting on AAPL falling back below $100 before front-month options expire at the close on Friday, May 20. 

Surprisingly, anyone buying premium on short-term AAPL options today can do so at a relative bargain -- despite tomorrow's quarterly earnings report. For example, the stock's Schaeffer's Volatility Index (SVI) of 28% sits near the bottom quartile of readings from the past year. In other words, the options market is pricing in lower-than-usual volatility expectations for AAPL. 

As far as earnings go, AAPL has traded lower in the session immediately following the release of its quarterly reports in three of the past four quarters -- including a 6.6% post-earnings slide in January. The options market is pricing in a similar move of 6.8% this time around, in either direction. Obviously, shareholders hope the stock can avoid the post-earnings fate of its fellow tech giants from last week.

AAPL has been sliding on the charts in recent weeks amid several downbeat reports about iPhone production. While the stock is still hovering around the $105 area that offered support in the latter half of March, the shares are positioned for yet another close below their 10-month moving average

It's more of the same today, with Apple Inc. (NASDAQ:AAPL) 0.9% lower at $104.72. The drop comes despite the company's dismissal of iPhone price-hike reports in India. Plus, AAPL was listed as one of major money managers' top picks for the next year in Barron's latest Big Money poll (subscription required), with 77% of those surveyed giving the stock a thumbs-up recommendation. 

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