Apple, Facebook Stocks See Heavy Call Trading Ahead of Earnings

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Stocks highlighted in yellow are new entries to the list. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names to note today are tech andstocks Facebook, Inc. (NASAQ:FB) and Apple Inc. (NASDAQ:AAPL). Below, we'll break down recent options trading activity on FB and AAPL, as well as how the stocks are faring ahead of this week's highly anticipated earnings.

Facebook's Outlook Remains Optimistic Ahead of Earnings

FB was down 1.2% at $187.78 at last check. However, it still has picked up 43% over the past 12 months, and on Jan. 24, touched a record high of $190.66. FB -- scheduled to report earnings Wednesday after market close -- has also managed to maintain a position atop its 80-day moving average, dipping below the trendline only a handful of times over the past four months.

Deutsche Bank sees more upside, too, as it hiked its price target to $225 from $220 this morning. At the moment, 25 out of 26 analysts following the FAANG stock have "buy" or "strong buy" recommendations in place, with an average 12-month price target of $212.64 -- a 13% upside to current levels.

From a post-earnings perspective, FB has been higher the day after earnings in four of the last eight quarters -- including a 16% surge in January of 2016. The shares have averaged a single-session post-earnings swing of 4.6% in either direction, looking back two years. This time around, the options market is pricing in a larger-than-usual 9.6% move, per at-the-money implied volatility data.

In the options pits, call buying has been ramping up per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Facebook stock's 10-day call/put volume ratio of 2.34, ranking in the 86th percentile of its annual range, shows calls have been bought over puts at a faster-than-usual clip in recent weeks.

Digging deeper, the weekly February 2/2 190-strike call saw a notable increase in open interest, with nearly 17,000 contracts added. According to data from the major options exchanges, there has been mostly sell-to-open activity here, hinting at expectations of a post-earnings volatility crush.

AAPL Falls on iPhone X Production Cut

FB's fellow FAANG stock AAPL is also lower, down 1.4% to trade at $169.21 at last check, and on track to settle below its 80-day moving averages for the first time since Oct. 4. The main catalyst for the drop is a fear of falling iPhone production and demand, after reports surfaced that the company drastically cut its iPhone X production. This news comes just ahead of the Dow name's fiscal first-quarter earnings, expected Thursday, after market close.

It's been a tough stretch for Apple shares of late, but long term, the stock has benefited from a more than 38% gain over the past 12 months, and recently touched a fresh all-time high of $180.10 on Jan.18. What's more, the security is still holding well with analysts, as a heavy majority of the 29 following the stock, carry "buy" or "strong buy" recommendations.

Looking at past earnings reactions, Apple stock has seen a positive post-earnings reaction during the past two quarters, and four times during the past eight quarters overall. The shares have averaged a post-earnings swing of 4.4% in either direction in the session after reporting. This time around, the options market is pricing in a larger-than-usual 7.2% move for Friday's trading, per at-the-money implied volatility data.

AAPL options traders have also been optimistic of late. During the past two weeks at the ISE, CBOE, and PHLX, Apple stock has racked up a call/put volume ratio of 2.64, which ranks in the 92nd percentile of its annual range -- meaning calls have been bought over puts at a faster-than-usual clip.

However, the weekly 2/2 175-strike call has seen the single largest increase in open interest for options not yet expired during this time frame, with over 39,000 contracts added. Most of this open interest was accumulated on Jan. 25, and can be attributed to both buy-to-open and sell-to-open activity on that day.