Bearish Apple Bets Decline Most in Year as Investors Drop Puts
January 25, 2011, 11:52 AM EST
Jan. 25 (Bloomberg) -- Bearish bets against Apple Inc. fell the most in a year yesterday as investors let put options expire after the iPhone maker reported record sales last week.
By Cecile Vannucci and Jeff Kearns
Outstanding puts to sell Apple stock fell 50 percent to 563,304 yesterday, the largest decrease since January 2010, as investors allowed bearish positions to expire instead of renewing them using contracts with longer maturities. That pushed the ratio of existing puts to calls down to 0.82 from a 16-month high of 0.99-to-1 last week.
“People were concerned for a pullback, but they didn’t roll” their positions into longer-dated ones, said Henry Schwartz, president of Trade Alert LLC, a New York-based provider of options-market analytics. “If people were concerned in general, they would have rolled them. Now it’s back to normal.” Rolling the positions would mean investors were still betting Apple would decline in coming months.
Apple sales gained 71 percent to a record $26.7 billion in the fiscal first quarter, the company said last week, as customers bought iPhone 4s, iPads and new MacBook Air laptops. Revenue would have risen more had the company been able to build more iPhones, Chief Financial Officer Peter Oppenheimer said. The results indicate that Apple will perform well even as Chief Executive Officer Steve Jobs takes medical leaves and Chief Operating Officer Tim Cook handles day-to-day operations, said Bill Kreher, an analyst at Edward Jones.
Stock’s Gains
Apple gained 0.4 percent to $338.80 as of 11:25 a.m. in New York. Cupertino, California-based Apple advanced 67 percent in the past year, more than the 19 percent increase in the Standard & Poor’s 500 Information Technology Index.
Put open interest jumped to 1.13 million on Jan. 21, the most since August 2008, while call open interest jumped to 1.15 million, the highest since January 2009. The subsequent decrease came as this month’s options expired at the end of last week. Exchange-traded U.S. equity options tied to stocks and indexes expire on the third Friday of each month.
Calls give the right to buy 100 shares of a security for a certain amount, the strike price, by a set date. Puts convey the right to sell. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will rise or fall.
