Apple Options Open Interest Rises as Volatility Gains Amid Concerns on iPhone Sales

Luzi Ann Santos joined discussion · Jan 4 02:12

$Apple (AAPL.US)$ options' open interest, the tally of outstanding contracts, rose Friday as large speculators jumped in amid higher volatility.

The implied volatility rose to 27.3% Friday, the highest since early November, as Apple shares headed for their fifth straight loss. A decline today would mark the longest losing streak for the stock since April.

Shares slipped after news reports that shipments of foreign-branded smartphones into China including iPhone, fell more than 47% in November. That added to investor worries over Apple's revenue outlook. Just a day earlier, Reuters reported that the company is selling iPhones at a discount in the Asian nation amid heightened competition among smartphone makers.

Apple Options Open Interest Rises as Volatility Gains Amid Concerns on iPhone Sales

(To see apple's options chain, click here. For the stock options ranking led by Nvidia, click here.)

The open interest for call options that give the holders the right to buy Apple shares at $245 by the end of the day almost quadrupled to 19,230 yesterday from 3,690 in the prior trading session. Call options would expire worthless if the stock price is below the strike price. Speculators sold new call options as the stock price fell for a fourth straight session yesterday. That decline in the share price increased the probability that the contracts would expire worthless, making the trade profitable for the sellers.

Apple shares slipped 0.4% to $242.99 at 1:22 p.m. in New York, meaning the $245 calls are still out of the money with just less than three hours left in the trading day.

The price of those zero-days-to-expiration (0DTE) $245 calls swung between a high of 55 cents and a low of 9 cents. That volatility provided speculators the chance to make money had they sold near the intra-day high. That may also help explain why the volume rose to more than 84,000 contracts, almost quadruple the open interest.

Data on weaker sales in China between September and November doesn't bode well for the expected upgrade cycle for iPhone 16, the newest model, Bloomberg News quoted Barclays analysts.

Still, Apple's strong services business could provide a cushion, giving the market "more confidence in the company's long-term business model, Bloomberg quoted an analyst at Monness Crespi Hardt as saying. That analyst has a buy rating on the stock and a price target of $245.

Share your thoughts on Apple in the comments section below. Can Apple recoup the losses over the past five days and resume its rally? Or will it again relinquish its crown as the world's most valuable company to $NVIDIA (NVDA.US)$? Let your voice be heard and vote below.

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