Apple options soar as market awaits dividend

Thu Aug 9, 2012 1:35am IST

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* Apple stock goes ex-dividend on Thursday

* Shareholders at Wednesday's close eligible for $2.65 dividend

* In-the-money call options soar

By Angela Moon

NEW YORK, Aug 8 (Reuters) - Options activity on Apple Inc jumped on Wednesday as investors scrambled for last-minute strategies to exploit Apple's first quarterly dividend in 16 years.

Apple shares closed down $1.05 at $619.86 on Wednesday with volume at 8.66 million, below the 50-day moving average of 14.2 million.

But options volume soared to about 1.34 million - 1.21 million calls and 128,000 puts - significantly exceeding the daily average of about 600,000 options.

Late last month, Apple, which beats earnings expectations with near regularity, reported its second quarterly miss in less than a year, sending shares down 4 percent the next day.

The stock, however, is up 1.7 percent so far in August and up nearly 1 percent for the week as investors rushed for the cash dividend. Shareholders as of Wednesday's close will be eligible for a dividend of $2.65 per share. The stock hit an all-time high in April of $644.

The in-the-money calls were trading at heavy volume on Wednesday.

"Traders buy those, sell them seconds later and exercise their right to turn the long call into stock, to trade into a long stock, short call position, trying to capture that $2.65 dividend," said Jon Najarian, co-founder of optionMonster.com.

"With 937.4 million shares at a $2.65 dividend, that's a $2.5 billion payout," he said.

The largest positions were in the January $400 strike calls carrying open interest of about 22,000 contracts and August $600 strike calls, which have open interest of 15,329 contracts, according to Henry Schwartz, president of options analytics firm Trade Alert.

Apple is usually the most active stock in the options market and has exceeded 1 million contracts per day several times this year. The previous all-time high was 2.1 million contracts on March 14, according to options analytics firm Trade Alert.

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