Apple options are doing something unusual into earnings

The U.S. stock market is in a two-month rut, bond yields are making new highs, and earnings from Alphabet and Tesla dropped the ball. Bulls need a hero. 

Enter Apple, the only stock among the ten biggest in the S&P 500 that’s near an all-time high.

After going nowhere for seven months, Apple stock is up 20% since its late-June low and less than two dollars below a fresh all-time record made just over a week ago.

Apple reports earnings after the bell Thursday, and options traders are leaning into the stock’s recent strength, with big-money traders buying in-the-money calls and speculators looking for a ramp to new highs by this Friday, according to trades put on before the market close Friday, and open interest that’s built up around the stock this summer.

Of the $590 million in options premium traded on Apple Friday, $442 million was tied to calls, according to SpotGamma. Traders bought almost 560,000 calls, compared to just 332,00 puts, ThinkOrSwim data show. Perhaps more importantly, options prices currently imply an almost 4% move for Apple after earnings, an unusually large move considering the average historical 1% swing over the past year, according to Cboe LiveVol data.

“I think the probability is fairly high that Apple could help stabilize the market this week,” said Nigam Arora, founder and author of The Arora Report newsletter. “Investors are viewing Apple as a defensive stock because, unlike several of its peers, it isn’t spending hundreds of billions on AI capex.”

The biggest trade in Apple Friday was someone opening a new position in $2.6 million of 280-strike calls in Apple expiring mid-August, a bullish position with a delta near one, meaning the trade acts as stock replacement for the owner.

The strike with the biggest open interest in options expiring this Friday is at $320, with 13,000 calls 5,000 puts, according to data from BarChart. That suggests even if the earnings don’t lead to a rally, investors are confident last week’s lows will hold.

The most popular contract expiring Friday by volume bought on Friday was the 300-strike put, with 7,500 contracts traded but for just $374,000 in total premium. The second-most popular was the 340 strike call with 5,000 contracts totaling $2.3 million in premium, SpotGamma data show.

That contract goes for $4.25 as of Friday’s close, meaning buyers need Apple to rally 3.4% this week to beyond its all-time high of $335.