Options traders may have an opportunity to take advantage of Apple’s (NASDAQ:AAPL) tendency to bounce in the weeks leading up to the annual Worldwide Developer Conference. The options trading team at Goldman Sachs (NYSE:GS) is advising options traders to purchase Apple June $450 calls in anticipation of this historically documented gain, reports Barron’s. This year’s WWDC begins Monday, June 10 and runs through Friday, June 14.
The Goldman Sachs team believes that the debut of the Cupertino-based company’s new iOS 7 and the possible unveiling of other new services will instigate a gain in Apple stock. Goldman Sachs’s analyst Bill Shope believes that these services may possibly include an e-wallet for electronic payments or even improvements to Siri, Apple’s voice-activated digital assistant.
“We believe that option investors are overly focused on the impact from last quarter’s $100bn capital allocation news and are missing this potentially important catalyst,” writes the Goldman Sachs’s options trading team in a note to investors via Barron’s.
The team also believes that this gain has a historical precedent, noting that, “Over the past 10 years, we find that buying the closest out of the money one month listed call two weeks ahead of the annual WWDC and closing the day after was profitable, generating an average profit of 52 percent (including bid/ask spread). This is because shares traded up 5 percent on average and implied volatility rose by 7 percent.”
Although the team notes that there is a potential “for volatility to remain lower given management is buying back a substantial portion of stock,” they believe the rewards outweigh the risks. With new versions of iOS and OS X debuting at WWDC, combined with the likelihood of additional product announcements, the team believes that the “source of volatility is being overly discounted at current levels.”
Here’s how Apple has traded so far this week.
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