With US stocks showing recent weakness and US Treasury yields rising, market attention is turning to Apple, which is about to release its earnings report. As one of the few companies among the top ten S&P 500 components still near all-time highs, Apple is seen by some traders as a key stock that could stabilize market sentiment this week.
Apple's stock price had been trading sideways for several months, but has rebounded by about 20% since its low at the end of June. As of last Friday's close, the stock price was less than $2 away from its recent all-time high. The company will release its earnings report after the market closes this Thursday, and options trading has clearly intensified ahead of the report.
Call options dominate
Data shows that the total premium paid for Apple options trading last Friday was approximately $590 million, of which about $442 million was related to call options. Nearly 560,000 call options were bought that day, while approximately 332,000 put options were bought, indicating that funds were more inclined to bet on an upward price trend.
More notably, a new position of approximately $2.6 million in call options with a strike price of $280 became one of the largest single trades of the day. These contracts will expire in mid-August and have a Delta close to 1, meaning their price performance is similar to that of directly holding the stock, and are generally considered a strong directional bet.
Post-earnings volatility expectations rise
Options pricing indicates that the market currently anticipates a potential 4% volatility in Apple's stock price following its earnings report. In comparison, the average daily volatility following Apple's earnings reports over the past year has been approximately 1%. This difference suggests that traders are positioning themselves for potentially larger post-earnings price movements.
Looking at the open interest distribution, among the contracts expiring this Friday, the largest number of open call options are those with a strike price of $320, totaling approximately 13,000 contracts; the corresponding number of put options is approximately 5,000 contracts. This structure suggests that some investors are still betting on Apple to continue its short-term upward trend.
Market sentiment betting on Apple led to stabilization
Some market analysts believe that Apple may become a key driver of sentiment in the US stock market this week. Previously, the earnings reports of Alphabet and Tesla failed to boost the market, while Apple, due to its different capital expenditure pace compared to some tech giants, is seen by some investors as a relatively defensive tech stock.
Based on last Friday's closing price, a call option with a strike price of $320 and expiring this Friday would cost approximately $4.25 per contract. For the buyer to realize a profit, Apple's stock price would need to rise by about 3.4% this week and break through its previous all-time high of around $335.
Overall, options trading ahead of Apple's earnings report has clearly leaned towards a bullish bias, with implied volatility significantly amplified. If earnings and guidance exceed expectations, Apple's stock price could not only impact its own but also provide support for the currently cautious risk appetite in the US stock market.
