Options Focus – Apple Bites, VIX-Lite

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Quite the busy day in Apple (NASDAQ: AAPL) options on Thursday. Stock in the news between yet another Steve Jobs Health Rumor and an imminent high profile meeting with Obama (and other tech gurus). 68,544 Feb 360 calls traded versus an open interest of 26,600 entering the day. For option trading investors It wasn’t just the calls though, as 41,598 Feb 355 puts traded, vs. an open interest of 13,939. You clearly have to think pin when you see all sorts of bets right ahead of expiration, especially since each option still carries about .95 worth of premium overnight. Now often when you see a large spike in options volume into expiration, it’s simply traders going up and back, and open interest does not explode. We’ll see though. As a human, it’s of course sad to ponder Jobs’ illness. And kind of insidious that this non-news news pops in and out over and over again. As an investor/trader, I can’t help but think it’s more than priced into the stock.

Some cross signals in the CBOE Volatility Index (VIX) on Thursday as per the OptionMonster Volatility Sonar. There’s strength in VIX futures for a change. Pretty much across the board. But VIX options saw selling of the March 18 straddle for $3, and the March 18-19 strangle for $2.65. March futures closed at 18.45, so the strangle is pretty close to delta neutral, and a bet against the volatility of … volatility. Yes, that’s a confusing concept. Just remember options on VIX bet on the volatility of the VIX future. So VIX straddle and strangle sellers expect VIX to hover in this general range. The seller of the March 18 straddle wins if VIX settles anywhere between $15 and $21 on March expiration. Seems like a good bet.

Follow Adam Warner on Twitter @agwarner


Article printed from InvestorPlace Media, https://investorplace.com/2011/02/options-focus-%e2%80%93-apple-bites-vix-lite/.

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