Options Market Indicating Another Apple Disappointment?

by: James Cullen April 23, 2008 | about stocks: AAPL    
James Cullen

James Cullen

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With Apple (AAPL) set to report earnings today, I thought I would take a look at what bets are being placed on the options markets in the week leading up to earnings.

The following chart shows the change in open interest in both puts and calls from last Friday, the 11th (when AAPL closed at $147.14) to last Friday, the 18th (during which time the stock was up 9.5% to $161.04).

When put in the context of AAPL’s price movement of late, it probably shouldn’t be a surprise that the open interest in the puts has moved up, although the size of the increase is definitely noteworthy. Are options players saying Apple is set up to disappoint again?

I've been critical of AAPL's valuation previously, and with the lack of a defined trend in tech earnings - as well as a lack of willingness by the broader market to reward companies with higher multiples - I simply think the prudent thing to do is remain conservative with your bets, especially around earnings time.

Disclosure: none

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This article has 5 comments:

  •  
    Apr 23 06:44 AM
    OK, the market hates high multiples: RIMM, FSLR, POT.

    What the heck are you smoking?

    There's nothing in this artcle whatsoever contentwise....
    Reply | Link to Comment
  •  
    Apr 23 07:01 AM
    Last time Sandisk's stock was in this type of option position the stock did the reverse of what the options indicated. In this case the put options may be insurance for those who are long Apples stock.
    Reply | Link to Comment
  •  
    Apr 23 07:19 AM
    I wouldn't put too much faith on Max-Pain until close to expiration, and even then it can be simply blown away by momentum, just like it was last Friday, where the balance between calls and puts was at $145 (if I remember correctly)
    Reply | Link to Comment
  •  
    Apr 23 08:13 AM
    Buying Puts and Stock= Calls, sounds bullish to me
    Reply | Link to Comment
  •  
    Apr 23 11:08 AM
    Volume without price data is meaningless. If you had provided the change in implied volatility along with open interest, you might have something worthwhile to the readership. Currently implied volatility is below historic, rather rare just before an earnings release. This would imply to me that the market thinks there won't be any surprise in AAPL's earnings announcement. On the other hand, if you like earnings plays, this looks like a good strangle play ahead of earnings.
    Reply | Link to Comment
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