Options Traders Stay Hopeful as Apple Tests Key Level

China headwinds and a Supreme Court ruling are weighing on the FAANG stock

by Patrick Martin

Published on May 13, 2019 at 2:42 PM

Apple Inc. (NASDAQ:AAPL) is down 5.8% to trade at $185.81, on track for its worst one-day drop since Jan. 3. Not only is the reignited U.S.-China trade war weighing on the shares, but an unfavorable Supreme Court ruling is allowing an antitrust lawsuit against Apple and its App store to proceed. In response, options traders have come out greater-than-usual numbers.

Specifically, more than 680,000 AAPL options have changed hands today -- 1.6 times the average intraday amount and volume pacing in the 90th annual percentile. Leading the charge is the May 190 call, with new positions likely being purchased. This indicates call buyers expect Apple stock to bounce back by this Friday's expiration. 

Widening the sentiment scope shows speculators are more put-skewed than usual among contracts expiring over the next three months. This is based on AAPL's Schaeffer’s put/call open interest ratio (SOIR) of 1.09, which sits in the 76th annual percentile.

Whatever the motive, the stock had been an attractive target for premium buyers over the last 12 months, according to its Schaeffer's Volatility Scorecard (SVS) of 99 (out of a possible 100). This means the shares have consistently realized greater volatility than what the option market priced in.

Even with its recent losses, Apple stock is still up 18.1% year-to-date -- one of the best Dow components so far in 2019. Plus, AAPL appears to have found a cushion in the $185 region, home to its pre-bear gap levels from mid-November, as well as its rising 80-day moving average.

Daily Stock Chart AAPL

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