Is AAPL Preparing To Squeeze Higher?

The Option Pit VIX Light Is Red, And Volatility Is Likely To Drop.

Hey Traders,

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,

Mark Sebastian

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