Shares of the iPad and iPhone maker eclipsed the $600 barrier for the first time on Thursday, only about a month after first topping $500.

Just a day before Apple's new iPad becomes available in stores, the stock ticked up to $600.01 at Thursday's open before selling off. The new iPad, at a starting retail price of $499, costs less than one share of stock.

Apple Inc's rally has been stunning - the stock is up 47 percent for the year and nearly 10 percent for the month.

"There is buyers' panic out there. What kind of a right-minded person would buy this after looking at an Apple chart that has been basically up in a straight line?" said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pennsylvania. Dailey owns put options in Apple as a hedging tool because the stock is "too hot to short."

Last month, Apple became only the sixth company in U.S. history to top $500 billion in market capitalization, a significant move for a company whose stock traded at $10 about a decade ago. None of the others, which include Exxon Mobil and Microsoft, were able to sustain that market value over time.

"The frenzy gets compounded because Apple has become dominant in indexes. They need to have Apple in their portfolios, and they don't want to miss the train that is leaving the station," Dailey said.

Apple currently accounts for about 18.5 percent of the Nasdaq 100 stock index. Its weighting was cut to 12.3 percent from 20.5 percent last April, but the price surge has pushed the stock's weighting back up, making this index of 100 well-known companies hostage to the performance of a few technology titans like Apple. "The key thing for people to realize is that Apple has gone into a parabolic rally," said Alec Levine, associate director of equity derivatives at global brokerage firm Newedge SA in New York.

"Volatility will stay elevated in Apple until a consensus valuation for the stock is re-established."

Dailey compared Apple with tech stocks during the dot-com bubble and a sudden surge in silver prices last year, and said he expects a 15-20 percent correction in Apple stock in the next couple of months, if not weeks.

Also on Thursday, the S&P 500 topped 1,400 for the first time since June 2008.

Earlier this week, Morgan Stanley and Canaccord Genuity both lifted their price targets on Apple to above $700.

Apple was trading down 0.4 percent at around $587 per share in early afternoon trading.

VOLATILITY AHEAD

One out of every five stock options trades in Wednesday's options market was in Apple, according to Henry Schwartz, president of options analytics firm Trade Alert. Options trading volume hit a record 2.11 million contracts on Wednesday, according to Trade Alert.

"It's also the greatest non-dividend single stock option volume seen since Citigroup was in the $4 pre-reverse split range in early 2011," Schwartz said.

Volatility in the stock has increased, judging by a VIX index that tracks Apple options. Didn't know Apple had its own VIX? It does - as do other blue-chip companies like IBM. Apple's VIX was introduced in January 2011.

The CBOE Apple VIX index, which measures the expected 30-day volatility of the underlying shares of Apple, jumped 16.2 percent on Thursday to 43.25. The index is up 22 percent for the month, suggesting more gyrations ahead as more investors speculate on short-term gains.

"What it shows is how crazy things have been getting recently in Apple," said Dan Nathan, a founder of RiskReversal.com.

The CBOE Apple VIX index works a lot like the CBOE Volatility index which generally moves inversely to the S&P 500 and is considered a gauge of investor fear. But while the VIX has declined dramatically to multi-year lows as the market makes new highs, Apple's volatility index has generally been rising in lockstep with the stock price appreciation.

"Volatility going higher as a stock goes higher is not usual activity and tends to happen in bubble situations. Is Apple a one-man bubble?" Nathan said.

(Reporting By Angela Moon; additional reporting by Doris Frankel in Chicago; Editing by Andrea Evans and Leslie Adler)

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