Bullish trade in Apple options reaps gains as shares jump on tariff exemption

By Saqib Iqbal Ahmed

NEW YORK (Reuters) - An unidentified options trader's multi-million dollar bet on a short-term rebound in Apple Inc.'s shares was set to reap a sizable profit as the iPhone-maker's shares soared on Monday following the Trump administration's weekend move to grant tariff exclusions for smartphones.

On Monday, Apple shares rose as much as 7% to a high of $212.94 before paring gains to trade up 4.5% at $206.05, after the Trump administration, late on Friday, granted exclusions from the steep reciprocal tariffs on smartphones and a set of other electronics products, a move seen as a big break for technology firms such as Apple that rely on imports from China.

The jump in Apple's share price means a bullish options trade opened Friday for about $5 million was, on paper, valued at about $14 million early on Monday, a gain of 180%, according to a Reuters calculation.

Friday's bullish trade could have been a trader speculating on a reprieve for Apple from tariffs or China in general over the weekend, Ophir Gottlieb, chief executive of Los Angeles-based research and financial technology firm Capital Market Laboratories, said.

"That rumor was floating around during market hours on Friday," he said. 

With Apple shares trading at around $192.69 on Friday, some 35,000 of Apple 25, 210-220 call spreads appeared to be bought for about $5.25 million, according to a Reuters analysis of Trade Alert data. Call spread trades involve simultaneous buying and selling of call options.

Friday's spread trade in Apple's options, one of the largest that day by contracts volume for individual stock options, was counting on Apple shares rising in the next two weeks to finish above $210 by April 25, with a maximum potential gain capped at around $30 million, if the shares rose above $220 by then. 

Based on Apple's share price at the time of the trade, the trader was counting on Apple shares to appreciate by as much as 14% to finish near where the stock was trading before President Donald Trump's April 2 announcement on tariffs. 

About 10,000 of these spreads appeared to have been closed early on Monday at an average price of about $4, according to Trade Alert data.

Apple shares tumbled as much as 23% in the days following the tariff announcement amid a market-wide selloff as investors fretted over the business impact from the tariffs on China, a major production hub for iPhones. 

The shares recovered ground late last week as markets rebounded and investors grew more optimistic about Apple securing an exemption from tariffs.

"I knew (the trade) was a China exemption play," said Joe Kunkle, founder of options analytics firm OptionsHawk.com, who noticed the trade on Friday.

"It was just positioning for what most of us knew would happen anyhow," Kunkle said. 

(Reporting by Saqib Iqbal Ahmed, Editing by Franklin Paul)