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There’s a reason why people trade options in Apple (AAPL).
Check out this massive call spread that took shape in the tech giant during Friday’s session.
The trade had a net cost of $0.84. AAPL closed at $217.58, so whoever was behind the trade walked home with $2.50 — profit of almost 200 percent. When you tally up all the numbers, we’re talking about a $13.5 million payout! Not bad for a day’s work.
How is that possible? Long calls fix the level where a security can be purchased, while short calls generate income and assign the exit price. Combining the two lets investors control the “spread” between two points on the chart. That opens the door to potentially huge leverage if they get the direction right.
(Of course, it’s still possible to lose money. See our Knowledge Center for more. Remember, options may not be suitable for all investors.)
As highlighted on Market Insights, AAPL has shot ahead of other technology stocks as investors embraced a transformational second-quarter earnings report. It ended Friday up nearly 2 percent, and has closed at record levels in nine of the 13 sessions in August.
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