Unusual Options Activity: Apple (AAPL)

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  • Big bearish bet on tech giant in the next month.

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  • Shares of Apple (AAPL) sold off Monday on a major downgrade, citing the company’s “fundamental deterioration.”

    Naturally, some traders saw that as an opportunity to sell shares—at least in the short-term. That explains the 100-fold increase in volume on the August 2nd $185 puts on the company. With shares of Apple trading just under $200, this is a bet on about a 7.5 percent decline between now and expiration in 25 days.

    Apple is a widely held company, due to its size and success. And while the company has pushed to improve its suite of high-value, high-margin products, the company has received much criticism for its lack of innovation. The company’s last major new product, the iPad, was nearly a decade old, and consumers are owning products like iPods and iPhones for much longer than in the past.

    Action to take: None, unless you have a large position and need to hedge it. Most investors, even those passively in the market, have a stake in the company, so this may sound painful. However, the big downgrade on Monday offered no new insight into any fundamental change with Apple.

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  • Shares are fairly valued near here at 17 times still-growing earnings, and the company’s large cash flow and large share buyback program will limit how far shares will decline. This option, trading for about $1.94, could even expire worthless.