Bearish Apple Inc. options are the most expensive in 10 months relative to bullish ones after the world’s biggest company sold fewer iPhones than forecast and apologized for faulty maps software.
Puts (AAPL:US) that pay should the iPad and MacBook Pro maker lose 10 percent cost 7.9 points more than calls betting on a 10 percent gain, according to one-month options data compiled by Bloomberg. The price relationship known as skew reached 8.04 on Oct. 2, the highest since November. The stock lost 4.1 percent since the iPhone 5 debut on Sept. 21.
Apple’s 66 percent rally in 2012 has helped anchor gains in the Standard & Poor’s 500 Index, which is posting its best annual advance since 2009. The stock has contributed 14 percent to the S&P 500’s advance this year, almost five times as much as the next biggest company, data compiled by Bloomberg show.
“More and more people are hedging,” Oliver Pursche, co- manager of the GMG Defensive Beta Fund and president of Suffern, New York-based Gary Goldberg Financial Services, said yesterday in a phone interview. The firm manages about $600 million and owns Apple stock. “There have been a couple of blunders and the iPhone 5 sales did not meet expectations. We’re debating whether it makes sense to hedge our position through buying puts.”
The tally of 5 million iPhones sold in the first three days of its debut fell short of some analyst predictions. Chief Executive Officer Tim Cook said he was “extremely sorry” for flaws in the company’s navigation software amid criticism that it misrouted directions and inaccurately located landmarks.
Cupertino, California-based Apple reached a record $702.10 a share on Sept. 19. The iPhone is Apple’s top-selling product, accounting for about two-thirds of its profits.
Implied volatility (AAPL:US) for one-month contracts with an exercise price 10 percent below Apple shares jumped 30 percent since the end of August to 37.95 yesterday, data compiled by Bloomberg show. That’s compares with a 19 percent increase to 30.01 for calls 10 percent above.
In March, the measure for bullish options rose to a record high relative to bearish ones amid the release of the third version of the iPad.
Steve Dowling, a spokesman for Apple, declined to comment.
Brian White, an analyst at Topeka Capital Markets, had estimated debut weekend sales of the iPhone 5 of 6 million to 6.5 million units, excluding Internet purchases that haven’t been shipped.
Apple, touting the map features as a key software change in the iPhone 5, dropped the Google Inc. maps program it had used since the device was introduced in 2007 to build its own alternative.
Strong earnings, $117.2 billion in cash and a justifiable price are reasons to remain bullish on Apple, according to Dan Veru of Palisade Capital Management LLC.
Analysts say the iPhone maker will post record profit (AAPL:US) this year. Earnings for 2012 will grow 61 percent to a record $44.46 a share excluding some items, according to the average analyst projection in a Bloomberg survey. Apple will release third- quarter results on Oct. 25.
“We think the valuation is reasonable and we think the catalyst is clearly the new iPhone,” Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey, said yesterday in a phone interview. His firm oversees $3.6 billion and owns Apple stock. “Earnings expectations are high, but we think Apple can meet them,” he said. “Their cash is an extraordinary story and they could pay out a special dividend.”
Investors value Apple at 15.8 times reported earnings, compared (AAPL:US) with 17.1 for the 2,474-member Nasdaq Composite Index, according to data compiled by Bloomberg.
The Chicago Board Options Exchange Apple VIX Index, which tracks the stock’s volatility expectations, rose 0.7 percent to 34.68 at 9:42 a.m. in New York today. It touched its highest level since June on Oct. 1. The CBOE Volatility Index, known as the VIX (VIX), fell 1 percent to 15.27 today, and Europe’s VStoxx Index, a measure of Euro Stoxx 50 Index option prices, lost 2.3 percent to 21.63.
The ratio of outstanding puts to sell Apple versus calls to buy rose 3.7 percent to 0.73-to-1 on Oct. 1 from the day of the iPhone release, data compiled by Bloomberg show. Last week’s average put volume (AAPL:US) relative to calls was 0.74-to-1, the most in a five-day period since June, according to the data.
Apple “options signal more nervousness,” Ralph Edwards, director of derivatives strategy at Investment Technology Group Inc. (ITG:US) in New York, wrote in a note to clients on Oct. 2. “It’s easy to assess the level of short-term anxiety in the stock.”
To contact the reporters on this story: Cecile Vannucci in Amsterdam at firstname.lastname@example.org; Nikolaj Gammeltoft in New York at email@example.com
To contact the editors responsible for this story: Lynn Thomasson at firstname.lastname@example.org; Andrew Rummer at email@example.com