Apple draws options bulls ahead of quarterly results

NEW YORK (Reuters) - Ahead of Apple Inc’s quarterly report on Thursday, traders in the options market have taken positions close to the most bullish since late December, options data showed.

Apple shares, which are up 44 percent this year and on pace for its best year since 2010, hit a record intraday high of $169.94 on Wednesday. The S&P 500 tech sector index is up 35 percent for the year.

The stock’s sharp climb has inspired little fear of a reversal and traders in the options market have been busy adding to bullish bets.

“The volume is stronger to the upside calls,” said Steve Claussen, vice president of trade strategy at E-Trade Financial in Chicago, referring to recent trading in Apple’s options.

Calls convey the right to buy shares at a fixed price in the future and are usually used to bet on shares rising. Put options give the right to sell shares at a certain price in the future and are bought to profit from declining shares.

“A lot of people are perhaps setting themselves up owning these upside calls thinking Apple is going to trade $180 or something,” Claussen said.

There are about 1.43 Apple call options open for each open put contract, close to the most since late December, according to options analytics firm Trade Alert.

Apple’s weekly options contracts imply a 4.5 percent swing in the shares, in either direction, by Friday. That is slightly shy of the 4.6 percent average one-day post-earnings move in the shares over the last eight quarters.

The technology sector has surged in recent days as quarterly results from Google-parent Alphabet Inc, Microsoft Corp and Intel Corp, have sent their shares soaring.

For each of these companies, the shares outstripped their respective options-implied moves and made for big gains for bullish options bets.

“I think a lot of people wish they had played the other stocks on the bullish side,” said Steve Sosnick, chief options strategist at Interactive Brokers Group in Greenwich, Connecticut.

“Why wouldn’t you expect them to do that in Apple.”

Some positive reviews of Apple’s eagerly awaited iPhone X may have helped boost investors sentiment ahead of results, Sosnick said.

E-Trade’s Claussen, however, noted that some near-term Apple puts were priced relatively higher than calls, suggesting that despite the bulk of trading activity and positioning pointing to bullish expectations, some element of anxiety remains.

Apple dipped 0.5 percent to $166.04 on Thursday.