The Option Pit VIX Light Is Red, And Volatility Is Likely To Drop.
I do not usually talk about equity options in the VIX Edge.
But I want to point out something really unusual happening in Apple (Ticker: AAPL).
Over the last two days, there has been an absolute explosion in AAPL’s option pits.
Volumes are exploding, and they are exploding in one specific contract.
I am going to tell you what is happening …
And how to play it.
On Tuesday, the market was down — at its lows, the S&P 500 was down 1.25%, and the VIX touched over 19.
You might think on a day like this, I would have a ton of VIX to discuss.
I do, and I’ll get to that tomorrow …
Today, though, I NEED to tell you about what is happening in AAPL, because I think it presents a real opportunity to clean up by playing the right options …
Like I said, volume is exploding in AAPL.
But that’s not true everywhere …
Rather, volume is exploding in options expiring this week!
Take a look at what August options did on Monday:
In four strikes, AAPL traded about 1 million contracts!
Today, more of the same:
In those same four strikes, there were about 700,000 contracts traded …
This caused option implied volatility (IV) to completely pop today.
Take a look at the CBOE Equity VIX on Apple (Ticker: VXAPL) over the last two days:
After coming down to the 24 range following AAPL’s earnings, VXAPL is right back to levels we saw before earnings were announced.
VXAPL now stands over 30 … pushed higher by options that expire in 3 days!
So how do I play it?
I think we are set for a huge gamma squeeze in AAPL.
If AAPL is up today, we could see AAPL explode higher.
I am talking about as high as $155, maybe higher.
With all of this trading in calls (which were almost all buys) …
If AAPL starts moving higher, the options trading will push the stock even higher.
So how do I play it?
Watch the stock this morning …
If it opens green, look out.
With IV so high in options expiring on Friday, I would swoop in and buy the August 152.5-strike calls (we bought these in Robinhood Trader FYI).
They could jump from $0.55 to … who knows how high.
Your Only Option,