Big traders buy last-minute Apple protection

With a big move for Apple shares expected after the bell, options traders appear to be bracing themselves.

The Tuesday earnings report is expected to send Apple shares up or down by 6 percent, based on a look at options prices. (That is, 6 percent of the stock price is the amount one would have to pay in order to get exposure to a potential rise and a potential fall in Apple this week.)

As the big moment approaches, traders appear to be taking to the option market to get some cheap protection. Among all equity options, the most popular single options strike on Tuesday morning was the Apple 90-strike put expiring at the end of Friday's session, which technically represents the right to sell Apple shares for $90.

A particularly large trade was seen just after the open, when a trader appeared to buy 11,497 contracts of those near-term downside puts for 51 cents each. Since each contract represents 100 shares, this is a more than half-million-dollar bet that Apple slides some 10 percent in just a few days.

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Given the number of investors that are long Apple, either outright or implicitly as part of an index, this is more likely to be a hedge than an outright (low-probability) bearish bet. But either way, the trader is not alone: As of midday, put volume in Apple was running at nearly triple its average daily volume.

Over the past three months, Apple shares are down 13 percent.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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