Last night on CNBC’s Fast Money I highlighted a very bullish roll in near dated Apple calls:
Yesterday, shortly after the open, when Apple was trading around $631, a trader sold 8300 July 600 calls at 37.90 to close and bought 10,250 July 680 calls for 4.10 to open. Trader took in about $31 million in premium, and spent about $4.2 million to play for further upside with break-even up almost 8% on July expiration.
And then just a bit ago, another trader (maybe the same, who knows) sees more potential upside, as two huge options trade printed shortly after the open within a minute of each-other when the stock was about $641:
-Buyer of 20k of the Oct 675 calls for $21.30
-Buyer of 10k of the Oct 700 calls for $14.75
The first trade is a premium outlay of over $42 million, and the second trade is an outlay of nearly $15 million, a massive amount of premium for any investor. In other words, if AAPL closes below $675 by October expiration, then this trader will lose over $57 million.
The break-even on the Oct 675 call would be $696.30, and on the Oct 700 call, it would be $714.75. In other words, this call options buyer would only make money if AAPL made a new all-time high above $705 by October. At this juncture, that’s about 10% away on the upside.
The AAPL stock split is next week (June 9th), and the stock is trading at an important technical spot, as $644 was the high back in April 2012:
Perhaps part of the reason for the options trade is someone views call options here as a decent alternative to owning AAPL stock, given that implied volatility is still near 2 year lows even after the strong run since earnings:
The cheap level of options pricing on one hand and the large rally since mid-April (more than 20%) on the other hand is certainly a rare situation. Of course, this one buyer alone moved options pricing a bit higher, as can be seen by the intra-day graph of implied volatility for the Oct 675 calls:
Add it all up, and these call buyers have expressed a view that they view owning AAPL calls as an attractive alternative or addition to owning AAPL stock on its own.