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Large Option Traders Selling Apple Calls Following G-7

Wayne Duggan

Apple, Inc. (NASDAQ: AAPL) shares bounced back on Monday after headlines in the wake of the G-7 meeting over the weekend suggest trade negotiations between the U.S. and China could be getting back on track.

Large option traders were scrambling to adjust their positions on Monday. Here’s a look at some of the biggest trades and how investors are playing Apple.

The Trades

On Monday, Benzinga Pro subscribers received 21 option alerts related to unusually large Apple trades. Here are a handful of the biggest:

  • At 9:34 a.m., a trader sold 797 Apple call options with a $200 strike price expiring on Sept. 20 near the bid price at $11. The trade represented an $876,700 bearish bet.
  • At 9:45 a.m., a trader sold 662 Apple call options with a $205 strike price expiring on Nov. 15 near the bid price at $13.25. The trade represented a $877,150 bearish bet.
  • At 9:47 a.m., a trader sold 743 Apple call options with a $200 strike price expiring on Sept. 20 near the bid price st $10.901. The trade represented an $809,944 bearish bet.
  • At 10:12 a.m., a trader sold 754 Apple call options with a $200 strike price expiring on Nov. 15 near the bid price at $16. The trade represented a $1.20 million bearish bet.

Of the 21 total large Apple option trades, just six were either calls purchased at or near the ask or puts sold at or near the bid, trades typically seen as bullish. The remaining 15 trades were calls sold at or near the bid and puts purchased at or near the ask, trades typically seen as bearish

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given how widely-owned Apple is among institutional investors and the sheer number of large trades that occurred on Monday morning in a relatively short amount of time, there’s a good chance at least some of the trading action came from institutions.

More Volatility Ahead?

Assuming the majority of option trading activity wasn't related to hedging, most of the Apple trades on Monday were bearish in nature. That dynamic is a stark contrast to an uptick in bullish Apple option trading Benzinga reported last week.

Wedbush analyst Daniel Ives said the rapid escalation in trade war rhetoric last week leading up to the G-7 meeting was a “gut punch” for Apple.

“We believe the China tariff situation is a $20-$25 stock overhang on shares of Apple as this remains the nightmare that will not go away for investors (as well as Cupertino now clearly caught in the crossfire),” Ives said.

U.S. President Donald Trump ordered U.S. companies to immediately look for alternatives to China on Friday, but Ives estimates it would take Apple at least three years to move just 20% of its iPhone production outside of China. Despite the bounce-back in optimism on Monday, longer-term bearish option traders seem to be betting Apple and its investors could continue to be collateral damage in the ongoing trade war.

Apple's stock traded around $205.50 per share at time of publication.

Related Links:

Large Harley-Davidson Option Trader Bets On 10% More Downside

How To Read And Trade An Options Alert

Latest Ratings for AAPL

Date Firm Action From To
Aug 2019 Initiates Coverage On Equal-Weight
Jul 2019 Maintains Hold
Jul 2019 Maintains Buy

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