Apple Options Recap – Record volume into iPhone 6 launch

Apple options have dominated the US single stocks landscape for several years now, with current average daily volume near a million contracts and AAPL option trades making up nearly 12% of the total US single-stock volume. While options are listed on 3670 other stocks, most professionals will tell you that AAPL options are by-far the most liquid contracts available, with narrow bid-offer spreads and large size creating a near frictionless market for traders.

Apple option volume had been increasing recently, as shares finally surpassed the $100 post-split level and anticipation of the iPhone 6 event started to build. A volume record of 2.3 million contracts was set on September 3rd but the real fireworks were yesterday as shares swung 6% on headlines came out of the Cupertino event.

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Nearly 3 million Apple options were traded on the day, blasting through the prior non-dividend record of 2.3M set just last week. Flow was brisk before the event started, with one block standing out as a trader paid 23c for 10K upside short-dated calls.

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Prior to 1pm ET we saw about 895K contracts trade, with calls leading puts 2:1 and 44% of the volume in weeklys expiring 9/12. Heading into the presentation shares were trading near $100 the 9/12 100 straddle was quoted $4.17. Short-term weeklys into events and earnings are a reasonable proxy for the expected share move to come.

As dozens of headlines began to hit (particularly those about ‘Apple Pay’), shares rallied to a new all-time high over $103 by 2pm ET. Option volume during that hour was 741K contracts, but when Tim Cook moved onto the iWatch sentiment quickly changed, with shares selling off nearly 6.5% over the next hour to a low near $96. Option volume peaked during this time- with 1 million contracts (the entire ‘normal’ daily volume for AAPL) trading between 2pm and 3:15ET. By the end of the day AAPL had regained some ground and closed at 97.99- and the 100 straddle was at $2.81. Calls led puts 2:1 and short term weeklys dominated the scene, making up 53% of the total. 101, 102 and 103 strike calls expiring 9/12 were most active, with well over 100K of each contract changing hands. Net open interest growth was only 448K contracts which indicates a great deal of day-trading was going on.

Implied volatility in Apple options saw notable movement as well. VXAPL, the VIX for Apple options, opened the session north of 30 and then fell to low of 24.53, or 18.5%, as the event unfolded, before rebounding to 27.25 into the closing bell. The index is down another 1.23 points, or 4.5%, to 26 this morning and smack-dab in the middle of the 52-week range (37.26 from 10/28 and 17.96 on 5/13) as uncertainty for shares persists now that the highly-anticipated iPhone 6 has passed.

Kudos to the 12 options exchanges who handled the surge in flow without a hiccup too!