Some investors speculated that the move by AAPL could pressure Google (GOOG) or Amazon (AMZN) to buy P. Others took AAPL's entry as a sign that the market for streaming music might be more profitable than had been assumed. Whatever the merits of these sorts of rumors and speculation, they can have effects on the value of out of the money options. July 18 calls traded on Monday at about 58.4% implied volatility, which is actually greater than the average IV of at the money strikes.
Overall, short term implied volatility in P is in the bottom quartile of its one year range. While options could get cheaper still, with earnings and the WWDC announcement out of the way, there aren't as many catalysts for downside price action or spikes in volatility. At the same time, elevated upside skew - due perhaps to the churning rumor mill - allows us to take a bullish position at a significantly reduced cost.
Trade: Buy to open P July 16 calls for $0.95 and sell to open P July 18 calls at $0.35.
OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits.
Jared can be followed on Twitter at twitter.com/CondorOptions.
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV