Apple Inc. (AAPL) Options Heat Up Amid Ugly iPhone 7 Chatter

Apple Inc. (NASDAQ:AAPL) options volume is accelerated on negative analyst attention and unconfirmed rumors of iPhone 7 battery explosions

Sep 19, 2016 at 1:57 PM
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Tech titan Apple Inc. (NASDAQ:AAPL) is in the red this afternoon, with J.P. Morgan Securities analyst Rod Hall raining on the stock's recent iPhone 7 parade, calling the optimism "premature." In addition, Street Insider said AAPL is down on unconfirmed rumors (subscription required) that iPhone 7 batteries are exploding ala Samsung's Galaxy Note 7, just days after reports of a disturbing hissing sound when the devices are under load. At last check, AAPL has shed 1.4% to sit at $113.37, and the stock's options are trading at an accelerated clip.

AAPL has seen roughly 309,000 calls and 178,000 puts change hands so far, representing 1.2 times the average intraday clip. Short-term options are extremely dominant, with weekly 9/23 options accounting for the top 10 most active strikes.

The weekly 9/23 116-strike call is most active so far, with the International Securities Exchange (ISE) confirming some sell-to-close activity. Meanwhile, the ISE indicates some buy-to-open action at the weekly 9/23 114-strike call, indicating the buyers expect AAPL to rebound back atop $114 by the end of the week, when the options expire. 

Amid the iPhone 7 brouhaha, AAPL's short-term calls have grown extremely popular, with the security's Schaeffer's put/call open interest ratio (SOIR) sitting at an annual low of 0.49. In other words, near-term traders haven't been more call-heavy during the past year, with calls more than doubling puts among options expiring within three months. Further, the October 115 call is home to peak open interest among all series of Apple Inc. (NASDAQ:AAPL) options. This abundance of bullish bets overhead -- nearly 172,000 contracts, to be exact -- could translate into a short-term speed bump for AAPL. 

In fact, during the past two weeks on the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly two AAPL calls for every put. The resulting 10-day call/put volume ratio of 1.90 is higher than 84% of all others from the past year, underscoring the healthier-than-usual appetite for bullish bets over bearish. An unwinding of optimism in the options pits could spell trouble for AAPL.

On the charts, AAPL's 14-day Relative Strength Index (RSI) sits at 69 -- on the cusp of "overbought" territory, suggesting the stock may have run too far, too fast. Finally, with 28 out of 33 analysts offering up "buy" or better endorsements, AAPL could be vulnerable to brokerage backlash, should the iPhone battery rumors prove true, or should the product fail to live up to expectations.

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