The amount of volatility risk being traded daily in Apple options is regularly exceeding volatility traded on the S&P 500 exchange-traded fund. Implied volatility has subsequently been rising in tandem with the stock itself, with both factors signaling to some a possible break in the rise of either stock or volatility levels.
The vega, or volatility, traded in Apple exceeded the SPY ETF by 70% last Thursday as an example, whereas the next highest vega notional traded in a single stock that day was 3% of the SPY. On Tuesday and Wednesday of this week, options traded on Apple exceeded those on the ETF by USD11 and 9 million respectively.
Dean Curnutt, CEO of Macro Risk Advisors, an equity derivative broker-dealer in New York, believes this ongoing trend may preface a break in either the vol or cash market for the stock. Rarely do we see the price of a stock and implied volatility of options on the stock exhibit a positive correlation, as has been the case in AAPL, he told DI. This trend could signal difficulties for the vol community to continue to sell volatility. On a typical recent day, more than $25 million in vega in AAPL is changing hands. And when implied vol moves around like it does in Apple, vol traders can be easily marked out of positions, perhaps making them less willing to take such risk.
AAPL stock was down 2.20% at press timeon the day, a big dip considering its recent performance. On Thursday, AAPL dropped 0.6% while the S&P 500 was up 1.5%. That marked only the ninth time since March 2009 that the index finished up at least 1% while Apple declined at least 0.5%, according to a Wall Street Journalreport that cited Jason Goepfert, market-sentiment watcher at Sundial Capital Research.