As Nathan would point out, the options market is implying a move of about 4.5% in either direction into the weekend after Apple's report, and elevated call buying would suggest that traders are betting on that move resolving to the upside.
"The most active strike was the Nov. 1 weekly 250-calls. A little more than 26,000 of those traded at an average of $3.13," Nathan said. "Maybe about 13,000 or so were opening, and when you think about that sort of price action – weeklies into an event like this – you're just saying that these are traders looking to, kind of, play the momentum that's been in place over the last few weeks into what they expect to be a good earnings report.
As always, though, there are reasons that these traders are defining their risk by purchasing call options in Apple rather than buying the stock itself. "A few weeks ago, the stock broke out above that all-time high from about a year ago, here, and it just kept on going until today when we had that little move [lower]," said Nathan. "This stock is up 54% on the year, it's up 70% from the low that it made on Jan. 2Simply put, instead of buying the stock, these call-buying traders are choosing to define their risk by capping their losses at the $3.
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