Bearish Options Bets On Apple Are Spiraling Higher
By Callie Bost
Apple Inc. is down 13 percent in 17 days, its worst retreat since 2012, and in the options market at least, few traders are interested in buying the dip.
Speculators in Apple options are snapping up bearish bets at the fastest rate in almost four years. While Apple staged a late morning rebound Wednesday, they see no end to pain for a stock where as much as $130 billion of market value has been erased since it reached an all-time high in February.
Concerns ranging from China?s economy to iPhone sales and the shape of its price chart have conspired to send Apple into correction territory. As always in the options market, positions reflect existing owners buying protection against further losses and others trying to capitalize on the weakness.
?When you get a lot of people buying the puts, it shows that a little bit of panic and capitulation is setting in,? said Matt Maley, an equity strategist at Miller Tabak & Co. in Newton, Massachusetts. ?People are rushing to hedge their positions and even betting the stock will fall further.?
On Wednesday, contracts predicting a 10 percent drop in Apple?s shares cost 5.1 points more than those seeing a 10 percent rise, the widest spread since November 2011, according to three-month data compiled by Bloomberg.
That rush to hedge has reached record proportions. Traders have exchanged an average of 618,000 bearish contracts daily since July 30, the highest 10-day Apple put volume on record.
Apple?s latest drop began on July 21 and accelerated with the stock recording its steepest post-earnings tumble since January 2013 after disappointing iPhone sales rekindled concerns over whether the company can keep making must-have products.
Apple slid 5.2 percent Tuesday amid concern that China?s economic slowdown is deepening, after the country?s unexpected decision to devalue the yuan. The shares rallied 1.5 percent to $115.24 Wednesday in New York, erasing an earlier loss of as much as 3.4 percent.