As discussed yesterday, there is at least one blue chip stock which investors should avoid given the history of dismal performance in the month of August. Today we want to focus on one stock that could deliver big gains by the end of the month: Apple Inc. (NASDAQ:AAPL). Equity is fresh off a happy earnings report that produced a whole series of bull notes. Although the security recently pulled back from its July 15, all-time high of $150, there is much upside for AAPL as it enters a historically bullish month.
According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, over the past 10 years, Apple stock has been one of the best stocks to own in August. The security is one of only three names of technology hardware and equipment on White’s list of the 25 best S&P 500 stocks to own this month, and has an average return of 6.6%, 70% of which are positive.
A similar magnitude move from AAPL’s current position of $147.22 would bring equity to $156.94 – well above the aforementioned record high. In the charts, the stock has added 34.4% year-over-year so far and has suffered only one monthly loss in the past five months. And while Apple stock has suffered its fair share of pullback in the past year, the 200-day moving average managed to absorb two major declines in the first half of 2021 and remains an established trendline of support.
Shorts are already starting to build up their positions and there is still a lot of pessimism to be settled. Short-term interest rates rose 6.8% in the most recent reporting period, and the 96.36 million shares sold short make up a whopping 29.6% of AAPL’s available float.
Meanwhile, the options pits are extremely optimistic, with calls prevailing. On the International Securities Exchange (ISE), Cboe Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX), the 50-day call/put volume ratio of 3.82 is higher than all other measurements from the past year. In other words, long conversations are recorded faster than usual.
Now seems like a good time to bet on the next moves of the equity with options. This equates to Apple’s Schaeffer’s Volatility Index (SVI) of 20%, which is in the low 13th percentile of its annual range. In simpler terms, options players are currently pricing relatively low volatility expectations. What’s more, the security is Schaeffer Volatility Scorecard (SVS) sits at a high 98 out of 100, meaning AAPL has exceeded options traders’ volatility expectations over the past year.