Large Apple Option Trades Mostly Bullish On iPhone 11 Optimism

Despite broad weakness in the tech sector in the past week, Apple, Inc. AAPL shares have held up relatively well following indications that the iPhone 11 may be selling better than anticipated.

On Thursday, a flurry of large Apple option trades were more bullish that bearish, suggesting smart money is expecting Apple to continue to outperform heading into the critical holiday season.

The Trades

On Thursday, Benzinga Pro subscribers received eight option alerts related to unusually large trades of Apple options. Here are a handful of the biggest:

• At 9:42 a.m., a trader bought 755 Apple call options with a $230 strike price expiring on Nov. 15 near the ask price at $4.20. The trade represented an $317,100 bullish bet.
• At 9:58 a.m., a trader sold 598 Apple put options with a $217 strike price expiring on Nov. 15 near the bid price at $7.95. The trade represented an $475,410 bullish bet.
• At 10:23 a.m., a trader sold 2,504 Apple put options with a $210 strike price expiring on Oct. 11 near the bid price at $2.139. The trade represented an $535,605 bullish bet.
• At 11:10 a.m., a trader bought 700 Apple put options with a $160 strike price expiring in September 2020 at the ask price at $5.451. The trade represented an $272,550 bearish bet.

Of the 23 total large Apple option trades on Thursday morning, 14 were calls were purchased at or near the ask or puts sold at or near the bid, trades typically seen as bullish. The remaining nine trades were calls sold at the near the bid or puts purchases at or near the ask, trades typically seen as bearish. Each of the three largest trades of the morning, however, were all bullish in nature.

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large size of the largest Apple trades and the fact there were so many large trades make it likely that at least some of the trades were institutions hedging against large positions in Apple stock.

Apple Headed Higher?

The large option trades in Apple come after JPMorgan raised its price target earlier this week and said supply chain checks suggest the iPhone 11 models are selling better than expected. As a result, the firm raised its forecasts for third-quarter and fourth-quarter iPhone unit sales by 1 million and 3 million, respectively. JPMorgan is now projecting 187 million total iPhone shipments this year.

Benzinga’s Take

The good news for Apple bulls on Thursday is that, while there were both bullish and bearish trades, all of the biggest trades were bullish in nature, assuming they did not represent hedges.

The three largest trades specifically mentioned above totaled more than $1.3 million in bullish action in Apple.

The mixed nature of the Apple trading may be a sign that traders are conflicted over the bullish outlook for Apple but the increasingly uncertain global economic outlook. If the global economy tanks, there’s likely nothing Apple can do to keep its shares afloat no matter how well it executes.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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