BA promptly ceded that $100 billion market cap level
Subscribers to Chart of the Week received this commentary on Sunday, August 28.
With all eyes on the Jackson Hole symposium this week, interest was sparked on our trading team when Bloomberg reported an increase in bets for hedge fund managers in tech. Specifically, funds for U.S. megacap tech shows Amazon.com Inc (NASDAQ:AMZN) carries the most popular long position. But funds also took bets and boosted the likes of Apple Inc (NASDAQ:AAPL) and others.
However, this lack of diversification in their portfolios poses issues. Per Senior Market Analyst Chris Prybal, when these funds buy the same names they are suffering from concentration risk. Similar to Meta Platforms Inc (NASDAQ:META), the stock sold off and subsequently saw funds pile on, making it difficult to get out of the position during mass exits.
Also of interest is AAPL’s 50-day buy-to-open put/call volume ratio, which has flipped from the most bullish of all-time (late last year the reading dropped below 0.3, or 7+ calls per every 10 options traded), to above 1.0 for the first time ever. This indicates puts have been bought-to-open over calls in the past 50 days.
Even short-term traders are preferring puts, with the security's Schaeffer's put/call open interest ratio (SOIR) of 1.24 standing in the elevated 89th percentile of annual readings. Digging a little deeper, in the past 10 days, the August 175 call and 170 put from the same series have been the most popular, with more than 1.1 million contracts purchased, combined, per TradeAlert.
These options are looking affordable, which could indicate a part of the equity’s lofty put/call ratio. The stock’s Schaeffer's Volatility Index (SVI) of 25% stands in the relatively low 18th percentile of readings from the last 12 months, implying options traders are pricing in lower-than-usual volatility expectations. What's more, AAPL’s Schaeffer's Volatility Scorecard (SVS) tally of 93 out of 100 suggests the equity tends to outperform said volatility expectations.
On a strictly technical level, Apple stock has given a mediocre performance (at best) in 2022. Off 7% in this time frame, Friday is eyeing the security’s first close below the 20-day moving average since the shares broke above the trendline’s resistance back in early July. And while the tech powerhouse remains 11% higher year-over-year, it’s lost almost 4% in the last week alone, leaving hedge fund managers and options traders alike on a road of caution for the coming weeks and months.
