From “Options trader lays out huge bet on Apple into earnings” which aired Thursday on CNBC:
“The market is currently implying a 5.3% move [in either direction], substantially higher than the 3.2% we’ve seen over the last eight quarters, and one trader is taking advantage of this elevated implied volatility,” Tony Zhang, chief strategist at OptionsPlay, said Wednesday on CNBC’s “Fast Money.”
″[They are] selling nearly 20,000 contracts of the 150, 145 and 140-strike puts that expire this Friday, collecting about $770,000 in premium, betting that the stock will be above $140 by expiration. But, if it’s below $140, [they have] $290 million of stock purchase obligation,” Zhang said.
This particular trade includes a sale of 9,998 contracts of the 145-strike puts, alongside 4,999 contracts of the 150 and 140-strike puts, each.
Cue the video:
My take: That Apple will close Friday above $140 seems a pretty good bet, but it’s not one I could afford to make.
BTW, Tony Zhang looks like he’s 12.
If the stock does drop, Tony and can buy back the positions and sell puts at the same strike prices one week out (or more) putting money in his pocket.
He can go on forever, while Apple buybacks “have his back”. Pun intended.
It’s nearing time to celebrate or commiserate . . . at least short-term. Slightly more nervous than usual given the market has greater uncertainty, unpredictability and volatility vs recent prior earnings.
He’s SELLING Puts. Worst case, they get executed and he has to buy the shares slightly above market value. Then hold them until the price recovers above the strike – of a measely $140?
Duh.
That’s a smart millionaire. It’s a no brainer. Can’t lose.
Congratz to Tony Z!