Apple Inc. (AAPL) and Valeant Pharmaceuticals Intl Inc (VRX) have been popular among option traders recently
AAPL is 0.6% lower at $120.31, dragged down by broad-market headwinds. Meanwhile, the company announced that its iPad Pro will be on sale online this Wednesday, and will arrive in stores later this week.
The shares of AAPL recently broke through resistance in the $115-$120 neighborhood, riding the support of their 10-day moving average, thanks to a well-received showing in the earnings confessional. Against this backdrop, sentiment seems to have shifted toward AAPL in the options pits.
Heading into earnings, AAPL puts were more popular than usual among buyers on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Now, traders are scooping up AAPL calls over puts at a faster-than-usual clip, per the stock’s 10-day call/put volume ratio of 2.33 — in the 76th percentile of its annual range.
In the November series of options, the out-of-the-money 125 strike is home to peak open interest, with nearly 95,000 calls outstanding. The at-the-money November 120 call is runner-up, with close to 85,000 contracts in residence.
Still, short-term open interest remains more put-heavy than usual. Apple Inc.’s (NASDAQ:AAPL) Schaeffer’s put/call open interest ratio (SOIR) sits at 0.83 — higher than 76% of all other readings from the past year.
VRX is up 3.5% at $85.59, after activist investor Bill Ackman called the stock an “extraordinary bargain” at current levels, and said the recent sell-off is due to unwarranted “panic” and “fear.” In addition, Valeant said it will hold another conference call before the open tomorrow, after Ackman called its last one “too scripted.”
In case you’ve been living under a rock, VRX’s plunge stemmed from a damning report by short-seller Citron Research on Oct. 21. Since then, the stock has shed roughly 42% of its value, and touched a two-year low of $73.32 last Thursday — the same day daily option volume hit an annual high, with more than 250,000 contracts traded. Furthermore, its 14-day Relative Strength Index (RSI) rests at a paltry 26 — in oversold territory.
While Valeant Pharmaceuticals Intl Inc (NYSE:VRX) calls and puts have been bought to open in near parity during the past two weeks on the ISE, CBOE, and PHLX, increased volatility expectations have sent short-term option prices jumping. The equity’s Schaeffer’s Volatility Index (SVI) of 104% stands higher than 79% of all other readings during the past year.