Unusual Options Activity: Apple (AAPL)

Shares of consumer tech giant Apple (AAPL) have succumbed to the recent market decline, although shares are faring somewhat well given the company’s relatively strong cash flows and excellent branding. However, one trader sees further downside ahead.

  • Special: This Stock Can Pay Up To 35% Dividends
  • That’s based on the June 24th $125 puts. With 44 days until expiration, 13,129 contracts traded compared to an open interest of 122, for a 108-fold surge in volume on the trade. The buyer of the puts paid $1.46 to get into the trade.

    Shares are down just 17 percent from their 52-week high, and are still up 24 percent over the past year. The stock could help the overall market trend higher in time.

    The company sports a 26 percent profit margin, which is stronger than many tech companies as the economy has slowed recently. Revenue and earnings both rose by single-digit levels in the last year.

    Action to take: Where shares go from here is largely up to the markets, with the current fear likely weighing on shares more in the short-term. Long-term investors may want to hold off on going long until shares drop into the $125 range. The stock is a dividend growth play, but the starting yield is a bit low at 0.5 percent.

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  • For traders, the short-term puts look like an attractive bet for further market downside. Traders can potentially leverage any further drop in the next few weeks at a low cost.

     

    Disclosure: The author of this article has a position in the company mentioned here, but does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.