On Wednesday, traders in Apple options were preparing for a move in the underlying shares following the company’s earnings report.?
During the trading day, Apple shares opened at $508.81 and closed at $514.01.
For options traders preparing for a big move in the stock, Wall Street Journal’s Kaitlyn Kiernan reported that traders had been utilizing straddles, which jumped to about?$35.20 per share, that suggested a 6.9% move for the company’s shares.
This estimate percentage could move shares in a range of?$465 to $535, reported Reuters.?
Gareth Feighery, a founder of options education firm Markettamer.com, said to Reuters, “Three ingredients make this earnings for Apple especially appetizing for options traders: (CEO) Tim Cook has missed earnings estimates 60 percent of the time over the past five quarters, the stock has crashed almost 30 percent since September, and no stock has as many hedge funds owning it.”?
“Combine those three factors together and Apple is a fireworks display ready to ignite, which makes it no surprise to see its options building in a move of close to 7 percent post-earnings.”
So how big of a deal is this estimated move? According to the options research firm RiskReversal.com, in eight previous quarters, Apple’s average one-day earnings move was 3.9 percent.?
Maybe Wednesday’s options traders were on to something.
In Apple’s earnings report announced after the bell, the company?missed its?revenue expectations for the third consecutive quarter after iPhone sales came in lower than the?Street’s estimates; shares fell?6 percent.
Apple reported shipments of 47.8 million?iPhones–a quarterly record–but for analysts that fell short of the usual outperformance of the smarthphones they’ve grown accustomed to. They had estimated?50 million shipments.?
iPad sales were 22.9 million in the fiscal?first quarter, falling in line with estimates.?
In after-hours trading, the stock closed at $463.49, down 9.83 percent.