A wave of equity derivatives trading in Apple and other large tech companies helped push US stocks higher on Monday in a move analysts said recalled the frenzied market conditions of late summer.

Nearly 4m options contracts tied to the iPhone maker were purchased on Monday, the second-highest level of the year and among the busiest Apple options trading days on record, according to exchange operator Cboe. The purchases were concentrated in calls, which offer investors the chance to benefit from a rally in Apple shares.

Banks that sold call options were forced to hedge the trades by buying Apple shares, which helped send both the company’s stock and the overall market higher, several traders and strategists said.

“The move higher in tech stocks throughout the day was felt across the market,” said David Silber, head of institutional equity derivatives for Citadel Securities, adding that activity was in part driven by dealers “hedging large tech positions”.

Shares of Apple, which is to unveil new iPhones on Tuesday, climbed 6.4 per cent on Monday to $124.40, its biggest one-day gain since it said it would split its shares in July. The S&P 500, which counts Apple as its largest constituent, rose 1.6 per cent. The technology-heavy Nasdaq Composite gained 2.6 per cent.

Line chart of Number of Apple options contracts traded each day (m) showing A surge of Apple options trades captivate the market

The frenetic trading activity mirrored the sharp increase in equity derivatives trading volumes during late August and early September as retail investors and institutions piled into the derivatives market.

SoftBank, the Japanese conglomerate, earned the moniker the “Nasdaq whale” after the company made a multibillion-dollar options bet on derivatives in companies such as Apple, Netflix and Facebook.

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It was unclear from the trading on Monday if one institution was behind the surge in trading. Steve Sosnick, the chief strategist of retail brokerage Interactive Brokers, said it appeared retail investors were heavy traders of options. He said there was a flurry of small trades — generally fewer than 20 or 50 options traded at once.

Line chart of Year-to-date performance (%) showing Nasdaq and S&P 500 climb back towards record highs

“The amount of activity was nuts,” he said. “Much of the US public and all of the Canadian public have the day off of work today and a certain amount of them said, ‘Markets are open. Let’s trade.’”

Amy Wu Silverman, a derivatives strategist with RBC Capital Markets, added that market gains on Monday likely also reflected an unwinding of short positions in Nasdaq options, pointing to data from the Commodity Futures Trading Commission published on Friday.

More than 490,000 Amazon options traded on Monday, more than six-times the daily average this year, according to data provider Bloomberg. The trading accompanied a 4.8 per cent advance in the company’s stock price and came a day before the start of Amazon’s annual Prime Day shopping event.

Options activity by retail investors this year has been fuelled by low-cost trading provided by online brokerages — from established players like Charles Schwab and ETrade to newer entrants such as Robinhood.

Via Financial Times