Option Trader Makes $1.4M Bet On Apple Ahead Of iPhone Event

Apple Inc. AAPL has been one of the hottest stocks in the market in the past year, gaining 107.9% ahead of a highly anticipated 5G iPhone launch.

On Monday, a flurry of large Apple option trades were mixed ahead of Tuesday’s iPhone 12 event, but one trader made a $1.4 million bet Apple stock is headed higher this week.

The Trades: On Monday, Benzinga Pro subscribers received more than 100 option alerts related to unusually large trades of Apple options. Here are a handful of the biggest:

• At 10:04 a.m., a trader bought 316 Apple put options with a $150 strike price expiring on Jan. 15, 2021 near the ask price at $30.501. The trade represented a $963,831 bearish bet.
• At 10:29 a.m., a trader bought 520 Apple call options with a $120 strike price expiring on March 19, 2021 near the ask price at $14.50. The trade represented a $754,000 bullish bet.
• At 10:47 a.m., a trader bought 1,535 Apple call options with a $113.80 strike price expiring on Friday near the ask price at $9.60. The trade represented a more than $1.4 million bullish bet.
• At 11:06 a.m., a trader bought 500 Apple put options with a $120 strike price expiring in Sept. 2021 at the ask price of $17.351. The trade represented a $867,550 bearish bet.

The largest trade of the morning was bullish in nature, but two of the four largest were bearish. That ratio reflects the very mixed nature of Apple option traders ahead of Tuesday’s big event, with unusually large trades pouring in seemingly on a minute-by-minute basis.

See Also: Apple Kicks Off iPhone 5G Supercycle On Tuesday: Here's What To Expect

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.

Uncertain Outlook: In the near-term, the fate of Apple’s share price may be determined much less by the specs of the iPhone 12 and much more on whether or not expectations for Apple’s first 5G-compatible phone have gotten so high that there’s no way for the device to live up to the hype.

Long-term Apple investors have more than doubled their money in the past year in anticipation of the iPhone 12, so a great deal of success is already priced into the stock. At the same time, analysts are still expecting big things from the iPhone 12, and many are projecting a large portion of Apple’s massive global iPhone user base will upgrade within the next year.

Even if the iPhone 12 is a tremendous long-term success, short-term traders could see Tuesday’s unveiling as a sell-the-news event in which traders cash out at least some of their big gains over the past year. After all, Apple’s market cap now sits at $2.14 trillion after another big 5% gain on Monday, and additional near-term valuation upside may be limited no matter how awesome the iPhone 12 is.

Benzinga’s Take: The mixed nature of the Apple option trading on Monday suggests there is no clear consensus on where the stock is headed in the near-term following Tuesday’s event. The $1.4 million call purchase has a break-even price of $123.40 suggesting any additional upside for the stock between now and Friday is pure profit for the trader.