Options Traders See Apple Sell-Off As Near-Term Event
Note: This post was written by Brian Stutland, President of Stutland Equities and a contributor to CNBC's "Options Action."
Apple has led the market lower for the second straight day, and as a result, the implied volatility — that is to say, the cost of Apple options for October has popped 10.7 percent.
Yet, despite the volatile move, one option trader is willing to bet AAPL doesn't head too much lower. The trade was an iron condor, which means the trader sold the Sept. quarterly 660/710 strangle and hedged by buying the 650/720 strangle. This was done 1,645 times.
(Track Apple here.)
So what’s going on here?
Well, basically this trader sees Apple stock trading between $660 and $710 by the end of this week. In exchange for making this trade, risking $9.60 to make about $0.40. This is not a great payout, but the chances of making money are on his side as Apple would have to move a lot in the next two days to render this trade unprofitable.
Still, for my money, this trade is like picking dines off the track in front of an on-coming train.
Brian Stutland is the President of Stutland Equities and a contributor to CNBC's "Options Action."
Watch Options Actionon CNBC Fridays 5:00 p.m. ET, Saturdays at 6 a.m. ET and on Sundays at 6 a.m. ET
Questions, comments send them to us at: email@example.com