Apple Options Traders Are Betting Big On 15% Share Gain

Options traders are betting AAPL’s stock will rise by more than 10 percent by June.

Apple shares have been on a bit of a rollercoaster ride to start 2018, with concerns over weak demand for the iPhone X continue to swirl, and the broader market sell-off.  It all sent the shares reeling.

Despite this turbulence, options trader remain bullish on Apple, with some believing that the stock will rise by more than 15 percent to over $200 by June.

That optimism can be attributed to expectations of strong earnings growth, with analysts looking for earnings to grow by 25.5 percent to $11.55 in fiscal 2018.

Revenue is expected to rise by nearly 15 percent to $263 billion, according to YCharts.

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Bullish Outlook

A long straddle options strategy using the $175 strike price set to expire on June 15 suggests that Apple could rise or fall about 10 percent. That would put the stock in a trading range of $157 to $193, with the cost to buy one put and one call at about $18.

The number of calls massively outnumbers the puts by a ratio of nearly 2.5 to 1, with 26,600 open calls contract to only 10,100 put contracts.

These numbers suggest there are more bets being placed on Apple stock rising over the next few months.

Calls Heavily Favored

The $170, $175, and $180 call options have an open interest value approaching $65 million.

By comparison, the $175, $170, and $165 puts have an open interest value of about $23 million.

The contrast between the puts and the calls suggest that traders are betting more heavily that Apple shares will continue to rise.

A Rise Over $200

Some are even betting that the stock will top $200 by June 15. The strike price for $200 has an open interest of nearly 41,000 contracts and are trading at a price of $1.55.

Apple shares would need to trade to over $201.55 just for those options to break even, an increase of 15.8 percent from its current price around $173.80.

This is a big wager, nearly $6.5 million, considering the expense of the options and how far out of the money the options are from Apple’s current price.

Despite all the ups and downs in Apple’s stock over the past few weeks, options traders continue to have a positive outlook.

— The Option Specialist

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