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What's Hot!
OptionsHouse investment specialists Steve Claussen and George Ruhana give you a look at what's hot in the world of options. Get the inside scoop on which options are the hottest, and which ones are beginning to cool down.
Apple sees a strangle buyer after earnings but ahead of tomorrow’s product announcement
Options traders! The rebound continues today, albeit modestly. Let’s look at What’s Hot for January 26th. I’m Steve Claussen, Chief Investment Strategist at OptionsHouse.
Monday’s bounce is trying to continue today as the S&P 500 Index (SPX) has gained half a percent and the technology-rich Nasdaq Composite (COMP) is outperforming on the back of Apple’s (NASDAQ: AAPL) stellar earnings last night and gains today.
AAPL tops the OptionsHouse Hotlist today with almost 400,000 contracts trading! The stock started out slowly, but Main Street buyers seem to be persistent in the pursuit of the shares mid-morning; at one point, the stock was higher by over 5%!
The options action is unusually heavy in the February series as buyers are keeping an underlying bid to the volatility in here, post earnings. Tomorrow night, the company has perhaps an even more important event with the predicted launch of its tablet computer.
The February 200-210 strangle was bid and bought at $12.05 today, possibly expressing the view that Wednesday’s launch will impact the shares by another 5%! The risk to a long strangle is 100% of the premium paid, while the potential reward is dollar for dollar with the stock once the breakevens of 187.95 or 222.05 are breached. Apple is likely on everyone’s watchlist the next two days!
Also noteworthy today is the CBOE SPX Volatility Index (VIX), which has dropped another 10% from its recent spike! There are sellers of fron- month options in the SPX but this implied volatility measure is still much higher than one week ago when it recorded a 17.5%. My feeling is that if this modest rally does not hold, the VIX will likely spike right back up!
