Apple bulls appear to be taking to the options market to place long-term bets on the stock.
Over the past few days, there has been a considerable increase in positions in the Apple 130-strike call option expiring in in January 2018. About 10,000 of these contracts have been purchased in the past few sessions, representing positions on some $100 million worth of Apple shares.
While it is impossible to know the full extent of a given investor's positions on a stock, those buying these options will see profits on their position if Apple shares rise above roughly $133 by early 2018, which would represent a 36 percent rally for the tech giant.
"Up 40 percent in 18 months sounds shocking — until you realize that Apple was trading at that level a year ago. So it's definitely within striking distance to get to that point," Dennis Davitt of Harvest Volatility Management said Tuesday on CNBC's "Trading Nation."
More generally, "I think what you're seeing right now is people who are underweight and unsure buying calls to get exposure" to Apple. After all, the calls are trading at roughly $3, which potentially makes them a much more efficient way to gain exposure to the stock.
For that reason, said Max Wolff of Manhattan Venture Partners, "if you want to keep some of your powder dry but have some exposure to the fact that the company should be able to rally back to where it was, this is one way to do it."
In addition, Wolff said that while he doesn't anticipate a "rocket ship" back to $130, a surprise announcement of increased dividends or buybacks "could get you at least half the way back there in one day."
