Just over a month ago - before AAPL started to fall apart - we noted the extreme levels of complacency priced into AAPL options. Heading into tonight's earnings, it seems investors are as extremely concerned as they were complacent just a few weeks ago. AAPL option prices are implying investors expect significant downside possibilities - the most concerned they have been in 18 months. Whether this is ammunition for a squeeze higher or is just the over-crowded long hedgies covering into earnings on hope - looking to reduce into strength - we will see in a few hours (but for now - the constant fading of VWAP reversions suggests the latter).
The Options-implied skewness expectation of the forward distribution or returns for AAPL - or in English - the lower on the chart, the more investors are expecting a stock-drop.
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and day after day we are seeing pullbacks to VWAP (the red-lines and the horizontal lines) being faded on sizable volume - suggesting market-maker algos digesting institutional block sell orders...
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Evidently, this is not short-sellers - this is longs exiting - and the skew in options suggests those that didn't sell, covered up somewhat...
Charts: Bloomberg