Goldman says it's time to place bets on Apple

It could be a good time to place bets on Apple.

Goldman Sachs' options team points out that Apple options prices are very low, especially when compared with S&P 500 options.

Since they believe there is a higher chance of Apple shares making a big move than the market currently appears to expect, Goldman strategists Katherine Fogertey and John Marshall recommend the purchase of a "straddle" on Apple, which is a trade that entails purchasing both a bullish and a bearish option in order to play for a move to either the upside or the downside.

A less expensive strategy would be to simply bet on either a rise or a fall, by buying a call or a put.

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Either way, the options market's opinion about Apple certainly does appear to be shifting. An examination of data provided by FactSet shows that the implied volatility (a measure of expected future moves that is computed from options prices) of Apple shares compared with those of the SPDR S&P 500 ETF has fallen dramatically in recent years.

The Apple/S&P volatility disparity has fallen even further in recent weeks and days.

However, this obviously doesn't prove that buying every Apple option one can snatch up is wise. According to Susquehanna head of derivative strategy Stacey Gilbert, implied volatility in Apple isn't necessarily cheap, it's just cheap relative to volatility expectations for the overall market.

"The really interesting takeaway is that Apple volatility relative to the S&P 500 looks inexpensive," Gilbert said Friday on CNBC's "Trading Nation." "But you have to sell the S&P 500 volatility against it. ... That's the way that you would zero in on that implied volatility being too cheap" — adding the cautionary note that taking on exposure to outsized S&P 500 moves is probably best left to professional traders.

For those who want to use the insight to trade Apple alone, she would suggest simply buying a call or a put, and taking comfort in the notion that the option they are buying may be moderately priced compared with other choices in the market.


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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 CNBCand 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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