Apple Call Options Gain on New Product Speculation (Update1)
(Updates with closing prices in fourth, fifth paragraphs.)
By Jeff Kearns

Jan. 14 (Bloomberg) -- Options traders increased bets that Apple Inc. will advance this week after two analysts raised their profit estimates for the iPhone maker and said the company may introduce products at the Macworld Expo tomorrow.

Chief Executive Officer Steve Jobs may use his annual keynote address at the event in San Francisco to announce slimmer laptops, higher-capacity iPhones and a digital movie-rental service, Bank of America analyst Scott Craig wrote today.

"It's certainly bullish," said Adam Futterman, director of options sales and trading at WJB Capital Group in New York. "This is a big event tomorrow. The product rollout is important but people are also looking to Jobs to give out a data point, whether on the number of Macs or iPhones they've sold."

The price of today's most-traded Apple options, January $180 calls, increased 28 percent to $4.30. January $190 calls, the second-most active, gained 3.6 percent to $1.16. For those wagers to pay off, Apple stock must climb 4.2 percent and 10 percent, respectively, from the Jan. 11 closing price before the contracts expire at the end of the week.

Apple advanced 3.5 percent to $178.78 in 4 p.m. New York Stock Exchange composite trading. It has doubled since Jobs introduced the iPhone, Apple's first mobile phone, at last year's Macworld conference.

"People who are making a play for a bullish move are looking at Apple and saying this could really rally," said Peter Dunay, who oversees $160 million including options as chief investment strategist at Leeb Capital Management in New York. "That's what the options are telling you."

$350 Calls

Trading in calls, or bullish options bets, outnumbered puts, or bearish wagers, by 2.1-to-1. July $350 calls surged the most, gaining 39 percent to 82 cents. Fifty of those contracts, which each convey the right to buy 100 Apple shares, traded.

Apple's profit may climb to $5.04 a share on sales of $31.7 billion this year, Bank of America's Craig wrote in a note today. That compares with Craig's previous estimates of $4.87 a share and $30.7 billion, respectively.

RBC analyst Mike Abramsky today boosted his 2008 profit estimate to $5.11 a share from $5.08. He raised his sales estimate to $32.8 billion from $32.7 billion, citing "ginormous" holiday sales of Macintosh computers. He estimates Apple shipped 2.5 million Macs in its fiscal first quarter, up 54 percent from a year ago.

Abramsky said in an interview he also expects the company to unveil a version of the Web-surfing iPhone for Canada.

The iPhone, which first went on sale June 29, is a combination iPod media player and mobile phone that also offers Web access and e-mail.

Apple options were the most-traded contracts linked to a stock last year, according to the Chicago-based Options Clearing Corp., which settles all trading of exchange-listed contracts in the U.S.

--With reporting by Michael Patterson in New York and Chris Fournier in Montreal. Editor: Nick Baker