Large Option Traders Dumping Apple Puts Ahead Of Tariff Deadline

Apple, Inc. AAPL has been one of the hottest stocks in the market in 2019, gaining 70.8% and reaching a $1.2 trillion market cap.

On Tuesday, a flurry of large Apple option trades were more bullish that bearish, suggesting smart money is expecting Apple to continue to outperform heading into 2020.

The Trades

On Tuesday, Benzinga Pro subscribers received 34 option alerts related to unusually large trades of Apple options. Here are a handful of the biggest:

• At 9:11 a.m., a trader sold 2,792 Apple put options with a $240 strike price expiring on Feb. 21 near the bid price at $3.551. The trade represented an $991,439 bullish bet.
• At 9:12 a.m., likely the same trader sold another 2,753 of the same Apple put options with a $240 strike price expiring on Feb. 21 near the bid price at $3.252. The trade represented an $895,275 bullish bet.
• At 9:20 a.m., a trader sold 4,459 Apple put options with a $265 strike price expiring on Dec. 27 near the bid price at $3.021. The trade represented a more than $1.37 million bullish bet.
• At 9:24 a.m., a trader bought 10,000 Apple put options with a $240 strike price expiring in Jan. 17 at the ask price at 90.1 cents. The trade represented an $901,000 bearish bet.

Of the 34 total large Apple option trades on Tuesday morning, 24 were calls were purchased at or near the ask or puts sold at or near the bid, trades typically seen as bullish. The remaining 10 trades were calls sold at the near the bid or puts purchases at or near the ask, trades typically seen as bearish. Both of the two largest trades of the morning 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.

Trade Deal Optimism

The large option trades in Apple come after CEO Tim Cook defended the fact that more than 90% of Apple’s products are assembled in China in a new interview with Nikkei.

“We've created well over 2 million jobs in the U.S.,” Cook said. “There's enormous manufacturing happening in the U.S., just not the assembly of the final product.”

There was also a large purchase of 10,000 Analog Devices, Inc. ADI call options with a Dec. 20 expiration date and a $125 strike price on Tuesday morning. The bullish plays on Analog Devices and Apple may both be bets that the U.S. will not move forward with its Dec. 15 tariffs on China after the Wall Street Journal reported the tariffs may once again be delayed.

Benzinga’s Take

A trade deal with China or even a tariff delay would be good news for Apple investors given how heavily Apple relies on China. The heaviest trading action on Tuesday was sales of Apple puts, which could represent a large Apple bear throwing in the towel ahead of potentially bullish trade news.

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

Related Links:

US Reportedly Poised To Delay Dec. 15 Tariffs

How To Read And Trade An Options Alert