As my readers know, I like to begin every new post with an image. Sometimes we are serious about the image and sometimes we are funny. When I went to get a picture of an apple in a simple Google search, I was surprised to see that the food apple did not show up until the fourth choice. This is something that is truly remarkable as the company Apple has far surpassed anyone’s wildest dreams in terms of popularity.
Fortunately for us, its popularity means more interest from investors! And as we are options traders, the more interest in AAPL options the better.
What can be said about AAPL that hasn’t already been said?
- World’s largest market cap at $730,000,000,000
- Up over 35% over the last year
- Pays a 1.64% dividend
- Warren Buffet just bought a ton of it
- Everyone, I mean everyone, is connected to the Apple ecosystem
While some of those vanity metrics are nice, let’s get a little more info out of the stock before we begin to salivate of AAPL options.
The most loved stock in the world is currently trading for $139.14 a share, sitting nicely right under its all-time high. No bad.
Even better, AAPL attracts the largest institutions, banks, pension funds, and investors in the world to trade in and around their positions all day every day. This leads to Apple trading 19,612,801 shares yesterday, making Apple one of the highest volume stocks around. Incredible as with the stock price where it is, that amounts to $2,728,925,131.10 in notional value.
While is it nice to be able to trade in and out of a stock like this, it is even better to trade their options. Let’s take a dive in AAPL options and see just how amazing they truly are.
AAPL Options are Truly Amazing
For starters, Apple comes with not just monthly but also weekly options which make it an incredible trading vehicle during earnings.
Whatever expiration we would like to trade Apple in we certainly can. Now to the good stuff.
WOW. Over 400,000 option contracts traded in one day. Those are big boy numbers and they amount to a total notional value of $5,623,830,090. Yes…B for billions. With this much volume, the bid/ask spread on the options must be worth salivating over…
and they are. Look at this…bid/ask spreads no more than $0.02 wide. Volume in the thousands. Open interest in the 10’s of thousands across the board. Heavy hitters are involved here, folks.
One thing that is interesting to note is open interest. Open interest is how many outstanding options contracts there are at any given time. Some of the time, open interest can give us a good understanding of where the collective market believes a stock will go to. Right now in the April expiration (third Friday in April), the $140 strike had the most open interest with 124,550 contracts. This would tell us that that $140 is the most interesting strike to the market right now.
With liquidity like this, we can trade call spreads, puts spreads, or calendar spreads and never pay more than midprice. At the same time, we can trade naked call and puts without giving up anything. And since Apple split its stock price, it is now easier than ever to trade naked options as selling the $130 call here would only require $2,600 in margin requirements for a standard margin account.
Want to be impressed even more? Some of the largest trades in the AAPL options market yesterday were gigantic. Here are the top five trades from yesterday:
|Option||Buy or Sell||Quantity||Price||Cost|
|31 March 17 135 Call||Buy||6,919 contracts||$5.01||$3,466,419|
|31 March 17 143 Call||Sell||5,811 contracts||$0.61||$16,619,460|
|24 March 17 142 Call||Buy||5,800 contracts||$0.55||$319,000|
|19 January 18 120 Put||Sell||2,000 contracts||$4.40||$4,800,000|
|24 March 17 142 Call||Buy||1,250 contracts||$0.60||$75,000|
Putting it all Together with AAPL Options
Yes, trading AAPL stock is awesome. Crazy volume and stock bid/as spreads of never more than $0.01.
However, we trade options and trading AAPL options is a blessing. Here are the pros of trading them:
- The most volume
- The most open interest
- The most expirations
- The smallest bid/ask spreads
- The most market makers.
- Not a lot of margin required
And here are the cons:
- ABSOLUTELY NOTHING