Apple Call Options Gain Traction After Bullish Barron's Note

Call traders have been active on Apple stock in recent weeks

Dec 17, 2018 at 1:17 PM
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Barron's tapped Apple Inc. (NASDAQ:AAPL) as one of its top 10 picks for 2019 (subscription required), saying the FAANG stock's "valuation looks attractive and there appears to be limited risk to current-year earnings even if one assumes a 5% to 10% decline in iPhone sales." The financial news magazine also pointed to Apple's massive buyback program as a source of significant buying power next year.

Options traders are showing a preference for calls over puts in today's trading, too, echoing a recent trend. In fact, Apple is on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that have attracted the highest options volume during the past 10 days, with names highlighted in yellow new to the list. In the last two weeks, roughly 2.39 million calls have changed hands on AAPL, compared to about 2 million puts.

most active options volume dec 17

Looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a notable portion of this activity was of the buy-to-open kind. AAPL stock's 10-day call/put volume ratio of 1.85 ranks in the 65th annual percentile, showing calls have been bought to open relative to puts at a modestly quicker-than-usual clip.

Drilling down on the front-month series, the December 170 call saw a prominent rise in open interest over the last two weeks. Data from the major options exchanges confirms a number of positions were bought to open, meaning traders expect a breakout above $170 by expiration at the close this Friday, Dec. 21.

On the charts, Apple stock's tumble from its Oct. 3 record high of $233.47 has been swift, with the stock down 28%. Plus, the shares entered bear-market territory in late November, and have shed 9% since an early December rejection at $185 -- near the site of that bear market threshold. And while the shares are up 1.6% today at $168.18, they are still staring up at their year-to-date breakeven mark of $169.23.

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