Big Printin’ Apple (AAPL), Disney (DIS) & Starbucks (SBUX)

by Dan July 11, 2016 4:41 pm • Commentary

In case you missed it, the S&P 500 (SPX) closed at a new all time high, a fairly tremendous feat (in my opinion) after 6 failed attempts since making a new high in May of 2015:

SPX since Jan 2015 from Bloomberg

Without going into too much detail here (see my thoughts on the rally, and ability to hold from this am MorningWord 7/11/16: Such Great Heights… Depths) I will add that I think it is interesting that a few prior market leaders like Apple (AAPL), Disney (DIS), Nike (NKE) and Starbucks (SBUX) have not participated in the rally back to new highs, with AAPL down 27% from its 52 week highs, DIS down 18%, NKE down 17%, and SBUX down 12%.

I wanted to quickly detail some options activity in the stock’s listed above in today’s trading:

AAPL: the company is scheduled to report their fiscal Q3 results on July 26th after the close. Today when the stock was $97.35 there appeared to be a bullish roll when a trader sold 10,000 Aug 105 calls at 40 cents and bought 10,000 Oct 105 calls for $1.48.  If this in fact a bullish roll then it would look to close out of a prior bullish bet targeting a move back above $105 this Summer and potentially give the view a bit more time targeting the launch of the company’s next iPhone due in late September.

DIS: when the was $100, a trader initiated a near term bearish position, possibly protection to an existing long, buying the August 5th weekly 99 / 96.50 1×2 put spread, paying $1.01 for 3000 of the Aug5th 99 puts and selling 6,000 of the Aug 5th 96.50 puts at 46 cents each, or 92 cents total resulting in a 10 cent debit. This trade breaks-even on the downside at $98.90, offering gains of up to $2.40 between $98.90 and $96.50. The max profit on Aug 5th weekly expiration is $2.40 at $96.50 with profits trailing off to $94.10.  The worst case scenario is that the stock is below $94.10 and the trader would suffer losses. The choice of August 5th weekly expiration is curious as the company is scheduled to report fiscal Q3 earnings on August 9th after the close.

SBUX: There was what appeared to be a bullish roll in SBUX options today that could position for future upside following their fiscal Q1 results scheduled for July 21st. When the stock was $56.53 shortly after the open a trader sold to close 15,000 July 22nd weekly 55 calls at $2.13 and bought to open 15,000 Aug 55 calls for $2.55. Whats interesting about this trade is that I suspect the choice of July 22nd weekly calls was specifically meant to catch earnings, but given the stock’s lack of participation over the last few days as the SPX has been approaching new highs, maybe the trader wants to buy time for a continuation of a post earnings rally. Obviously we have no idea what the intent of the trade is, maybe it is a trader who is short 1.5 million shares and looking to place a buy stop. (So we will offer our usual disclaimer when it comes to gleaning too much from unusual options activity, but worth noting given the proximity to earnings.)  The options market is currently implying about a 4% one day post earnings move, and these Aug calls now break-even up at $57.53, up less than 2% from the trading level, which leads some credence to the fact that the in the money call roll was likely a bullish set up for the trader.