Unusual Options Activity In Apple $AAPL

| October 28, 2015 | 0 Comments

Options on Apple (AAPL)Unusual Options Activity In Apple $AAPL 

As many of you know, unusual options activity can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.

This is something professional options traders pay a lot of attention to, and for good reason…  Unusual options activity can “tip off” big moves in a stock, either up or down.

So let’s take a look at some ‘interesting’ activity that caught our eye this week…

Apple $AAPL is the largest company in the world, with a market cap of over $650 billion.  The company is known for its innovative tech products, most notably the iPhone.  For a good description of the company, follow the link.

$AAPL is trading at $114.86… up 6% for the year.  That’s 14% below the 52-week high and 25% above the 52-week low.

So what does unusual options activity in AAPL tell us?

Apple is one of the most heavily traded stocks in the world, with an average volume of nearly 60 million shares traded per day.  With earnings coming out Tuesday after close, you can bet there’s going to be even more action than usual.

Despite being the largest company in the world and having some of the most innovative products on the market, AAPL shares are actually undervalued.  Even with really solid earnings news, investors often have ridiculously high expectations for quarterly results.

Here’s the deal…

This week, a major call spread traded in AAPL options.  Keep in mind, a call option makes money when the underlying stock goes up before its expiration date.  A long call spread is when a call at a higher strike is sold against a long call in order to reduce cost.

To be more specific, a trader purchased 40,000 November 124-125 call spreads for $0.20 per spread (long 124, short 125).  That’s a total cash outlay of $800,000 with max gain of $3.2 million.  Max profits would be reached at $125 by November expiration, or about 8.5% above the current price.

Here’s the chart of $AAPL:

unusual option activity, a chart of AAPL

Apple shares spiked above the 50-day moving average just recently, as you can see in the chart.  The jump was likely caused by the excellent tech earnings that came out during the week.  It seems investors are also expecting positive results from AAPL, although the share price has pulled back a bit since the initial jump.

This call spread suggests AAPL could see a relatively large spike in the price after earnings – at least before mid-November.  Keep in mind, a roughly 10% move in the stock is not at all unusual based on past post-earnings performance.

The spread itself is interesting because it’s only a $1 wide.  It’s basically similar to buying an OTM call at a discount.  The trader is capping profits at $125, but is getting a significant discount to do so.  Not coincidentally, there also seems to be a fair amount of resistance around the $125 level.

More Options Trading Ideas…

Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.

We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!

Yours in Profit,

Gordon Lewis

Note:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

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Category: Unusual Options Trading Activity

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.