Most Active Options: Microsoft Corporation and Apple Inc.

Option players are betting bullishly on tech stocks Microsoft Corporation (MSFT) and Apple Inc. (AAPL)

by Celeste Taylor

Published on Sep 28, 2016 at 1:07 PM
Updated on Sep 28, 2016 at 1:27 PM

The 20 stocks listed in the table below have attracted the highest options volume during the past 10 trading days. Stocks 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 stocks attracting notable attention are tech behemoths Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL).

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MSFT is one of several companies being tossed around as a potential buyer for Twitter Inc (NYSE:TWTR), though Walt Disney Co (NYSE:DIS) and salesforce.com, inc. (NYSE:CRM) have generated the most buzz. The stock is up more than 33% year-over-year, with the shares seemingly finding a foothold near $56 -- a level that formerly served as resistance -- since early August. Although MSFT notched a 16-year high of $58.70 on Aug. 26, it would appear the shares have been running into resistance near all-time-high territory just below $60. Today, MSFT is down 0.1% at $57.87.

In the option pits, bullish sentiment has picked up steam recently, with MSFT's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 3.37 sitting in the top 10% of all other readings from the past 12 months. Drilling down, peak open interest lies with the front-month October 60 call.

This concentration of call open interest could possibly reinforce the ceiling near the $60 level in the near term. However, it's worth noting that MSFT reports earnings after the close on Thursday, Oct. 20 -- one day before front-month options expire -- and another post-earnings pop like we saw in July could be the catalyst that sends the stock to record highs.

Meanwhile, AAPL -- which is creating a headquarters in London -- is rising on some positive analyst attention, up 0.5% at $113.65. Bernstein analyst Toni Sacconaghi waxed optimistic about AAPL iPhone ASPs, saying that he believes the iPhone average sale prices (ASPs) could increase in the first quarter of 2017, which could be an "additional cushion to FQ1 consensus revenue estimates." As such, Bernstein reiterated  an "outperform" rating and $125 price target. AAPL recently broke north of a channel of lower highs and lows, amid optimism about iPhone 7 orders, and is up 8% year-to-date. 

So far today, calls are accelerated, more than doubling puts, although according to Trade-Alert, there's a large amount of liquidation action in the options pits, possibly thanks to traders closing positions opened during the AAPL boom earlier this month. Widening the scope, AAPL currently sports an elevated 10-day call/put volume ratio at the ISE/CBOE/PHLX, with 1.83 calls bought to open for every put during the past two weeks -- a reading that sits in the top quartile of AAPL's annual range.

AAPL's Schaeffer's put/call open interest ratio (SOIR) of 0.52 sits near an annual low, indicating short-term option players have been more call-skewed only 3% of the time during the past 12 months. The equity's top open interest position remains the front-month October 115 call, which could limit its upside momentum in the near term.

But now is a good time to be an AAPL option buyer. The stock's near-term options are attractively priced at current levels, historically speaking, as its Schaeffer's Volatility Index (SVI) of 18% sits lower than 92% of all other readings from the past year. Likewise, AAPL's Schaeffer's Volatility Scorecard (SVS) sits at an elevated 93, indicating AAPL has tended to exceed options traders' volatility expectations over the past 12 months.

In addition to the apparent optimism in the option pits, analysts also appear positive toward both Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL). Among analysts weighing in on MSFT, 17 of 23 rating the shares a "buy" or better, and with only a solitary "sell" to be found. AAPL analysts, meanwhile, also appear to hold favorable opinions towards the tech stock, with 29 of 34 rating the shares a "buy" or better, and only two "sell" or worse ratings on the books.

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