Saturday, March 6, 2010

Apple: Using Options Rather Than Stock (AAPL)

Stock Assault 2.0 - Artificial Intelligence Stock Market Software

Apple hit all-time highs on Friday of $219.70 on an intraday basis and the stock closed at $218.95.  What is interesting is that trader sare moving back into using the options as their way to get exposure to Apple ‘on the cheap.’

The stock traded over 32 million shares on Friday, which is close to 150% of normal trading volume.  The open interest was over 125,000 call option contracts which would have been another 12.5 million shares on a fully leveraged basis.  But if you look at yesterday’s call option trading activity alone it is far more.  These are the MARCH-2010 CALL strikes with volume and open interest, as well as with the last contract price:

CALL$    Volume    OpInt    LA$T
200.00    11,090    20,017    $19.35
210.00    33,169    40,865    $10.25
220.00    63,425    32,787    $3.75
230.00    49,538    20,731    $0.86
240.00    8,386    5,284    $0.23
250.00    2,442    6,571    $0.08

These March-2010 strike prices traded right about 168,000 contracts.  That comes to 16.8 million shares on a fully leveraged basis.   When it costs about $21,900.00 or so to buy 100 shares versus $375.00 to buy the right to buy at $220.00 for another two weeks as the stock is hitting all-time highs, you can see why traders and smaller investors are choosing to get exposure to the upside with speculative options rather than by buying the stock.

And yes, these too will expire as worthless if they are not ‘in-the-money.’