Apple Options Leading Shares in Upside Exposure (AAPL)

Posted in Options 
June 1st, 2010

Traders are back to using stock options in Apple Inc. (NASDAQ: AAPL) for getting exposure to the price moves rather than the stock it seems.  We ran a snapshot of the options trading versus the stock trading today at 2:00 PM and the data is pretty obvious that there seems to be speculators in the name around the news of better than expected iPad sales.   Much of the gains may also be on follow-on bullish trading from the $310 to $400 analyst call last week.

Using options for high-priced shares is no new event.  But it is always interesting when you see the fully leveraged amount of options when converted into a share equivalent.  This is even more interesting when you consider that options buyers are out speculating in contracts with a strike price of $300 and higher in the CALLS.

  • For the June-2010 Calls around 2:00 PM EST, Apple’s more active contracts in the $230 to $310 strikes in the CALL options was more than 95,000 contracts.  The PUTS for June had over 47,000 contracts traded.  On a fully leveraged basis, that is over 9.5 million shares equivalent in the Calls and 4.7 million shares in the Puts.  Considering that Apple was right at 20 million shares at 2:00 that is very active options trading.
  • Go out to July-2010 expirations and the most active calls was nearly 40,000 contracts traded, almost another 4 million shares equivalent on a fully leveraged basis.  And in July, the active  Call options went all the way out to $310 and $320 strike prices.  That is obvious that traders and speculators are using leverage for upside exposure in the name at $1.00 to $2.00 per contract rather than paying over $260 per share.

POST CLOSE UPDATE: Apple closed up, despite the sell-off late in the trading day, by 1.5% at $260.83.  As far as those active contracts are concerned, those June CALLS traded a combined amount just a few contracts shy of 135,000… about 13.5 million shares equivalent on a fully leveraged basis.

JON C. OGG

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