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Post by Red Shirted Ensign on Feb 17, 2013 20:27:48 GMT -8
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Post by Deleted on Feb 17, 2013 20:44:01 GMT -8
IMHO, AMZN's descent from parabolic blow-off top has commenced. GOOG soon... Maybe bear put spreads would be appropriate about now? Very interesting. AMZN's P/C Ratio chart looks very, very much like AAPL's mid August - late October chart. Regarding today's P/C Ratio discussion. I continue to believe that P/C Ratio reveals LONG TERM sentiment trends. What ever effects of a Call/Put imbalance have in the short term (Friday OE) is a separate issue.
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JDSoCal
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Post by JDSoCal on Feb 17, 2013 20:52:03 GMT -8
Watching P/C Ratio action on a daily basis I have noticed that a great many Options "disappear" over the ensuing weekend (reflected in Monday morning's Open Interest. Could this Friday decline be the result of "unwinding", and there being a far greater number of Calls than Puts to unwind? Truth is, 1) A huge amount of calls never "unwind." Travis Lewis has commented on the "hope springs eternal" folly of the retail options buyer. So many of them just ride them into expiry hell, worthless; 2) If every strike of options is hedged, that allows a hell of a lot of shares for MM's to sell (or buy) going into Friday if pain doesn't go exactly as the MM's would like (as the volatility risk ticks away as expiry approaches, there is less downside in dumping/buying shares, i.e., theta). In other words, Pain Theory suggests that as Thursday and Friday come around, there is a lot of MM's trading of AAPL shares independent of their hedge relationship to options, to affect price (MM's don't wait for calls to "unwind" to trade common); Example: On Friday, rather than an unwind, we actually saw an *increase* in calls and a decrease in puts. And what happened to the price? It dropped below the previous day's 465-469.99 pain range and closed at 460.XX. Actually, I wrote it backwards. The price closed at 460.xx, and I then suspected that the 465 calls and puts had switched, and then looking at the final open interest numbers, they in fact had. Apple closed within the 460-464.99 range one would expect from the final open interest numbers.
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Post by bloodylongaapl on Feb 18, 2013 1:49:54 GMT -8
Not disputing good old Graham's theory, but wondering how that theory stacks up against a firm that has a habit of entering/creating, then dominating said markets, thereby generating new sources of revenue not included in previous revenue periods. Until 2000 Apple was a Mac company - one product category/one revenue stream. It then became a Mac and iPod company, thereafter adding digital music (iTMS) to its revenue sources - three product company/three revenue streams. Then along came the iPhone and the App Store, and then the iPad with its attendant app sales. The original iTMS had dropped the M from its name as Books, Movies, TV content and Mac software was added to its digital offerings. Eight product company/eight revenue streams. Now Apple seems poised to add yet another revenue source to its highly successful stable with some kind of TV product, and search, and advertising, nine (maybe 10, 11 or 12) product company/9, 10, 11 or 12 revenue streams. How does Graham's theory (which I don't have a problem with, if properly applied) address this scenario? Frankly, I don't think it does, because it looks at actual earnings from a single product company (can anyone say MSFT?), and not the rate of growth of said earnings, caused by entering/creating new revenue streams (isn't that why firms buy competitors or diversify into other industries?). Graham's theorem would certainly apply if Apple remained a one product company, like maybe ... Amazon, or Google. But it isn't. Taking into account Apple's apparent ability to lead industries in new directions time and time again, I don't think Graham applies at all. Agree. What that article doesn't do is take the stock price in an older period, say 2005, and use the model looking back to 2000-2002 to determine a valuation factor. It doesn't because it clearly wouldn't work, because the company fundamentally changed for the better in the meantime. The big question then is, as we all know, can Apple keep fundamentally changing/evolving for the better? If yes, this model doesn't apply. WS clearly thinks it can't.
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Post by mace on Feb 18, 2013 7:43:35 GMT -8
Graham's theory doesn't work for growth stocks. Is a theory developed for valuing real asset heavy matured businesses like banks, consumer staples, utilities, ... It works splendidly post-depression when many businesses are undervalued and recovering. He becomes famous for that. He almost went bankrupt during depression. The takeaway is not his valuation and selection criteria, is he has cash to buy those extremely undervalued stocks. He stayed solvent longer than the market was irrational. Similarly, if you can do that for AAPL, you would be the winner.
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Post by jeffi on Feb 18, 2013 8:24:17 GMT -8
Odd... You imply that high option trading volume makes it easier to manipulate a stock. I implied no such thing. A high volume of options gives the MM's more incentive to manipulate a stock price. They don't choose to write options; they have to. So they react accordingly, in a rational, profitable, legal way. Otherwise, what is the great "privilege" of being a market maker? Those sexy "Evil Overlord" business cards they can hand out to chicks in bars? 1. I did not write that. I posted it and correctly attributed it. 2. You state "MM's would much rather be using their equity to make money, instead of hedging, so they take some degree of risk to allocate the money elsewhere." Market makers lock in profits through their buy sell spread and by hedging. That is a profitable business. They don't need to take on further risk. How do you know that market makers would rather take more risk to make more profits? They can also take more risk and go belly up. I'm not saying that this does not occur. I am implying that you are exaggerating it and its impact. 3. Please provide a source to back up your claim that market makers leave massive positions unhedged for long periods of time. I think that would be the exception while you imply it would be the rule. 4. You further state... "The price action is f-ing obvious to anyone who watches on a Friday, and the fact that pain so accurately predicts where the close will be cannot be ignored." Nice prose. If its so predictable you must be getting rich by front running the action. Kudos to you. On the other hand, you sound bitter. Maybe, the pinning is occurring because unhedged retail positions are being unwound? But then, there would be no evil conspiracy. 5. I agree that FUD is employed to manipulate any and all stocks. This is unfortunate. I sound bitter? Really? Why would I be? I gave up the (buying) options lottery quite some time ago. You're the one who came on this board and essentially compared all of us option pain adherents to those who believe in Santa Claus, in a rather insulting, condescending way. I could sit here and argue all week about why you are wrong. But the fact is, I really don't give a shit if you or anyone else believes in pain theory. The reality is, the "why" doesn't fucking matter. All that matters is that the presents are under the tree every December 25th - or every Friday afternoon for options writers. The "what" is that over 90% of options expire worthless over 90% of the time. If you want to pretend this is the result of accident, perfect market mechanics, manipulation, or unicorns farting pixie dust, it doesn't fucking matter for our purposes. All that matters is the what: 1) 90%+ of the time, one can determine where AAPL won't close on options expiry, and 2) that 9X% of the time AAPL will be higher on Monday and Tuesday than it will be on Wed-Fri. Travis Lewis ran his "Poor Man's Algo" accordingly, and returned over 100% YoY in a 12-month period where AAPL has essentially returned 0%. If your portfolio returned over 100% YoY, by all means, ignore this post. I'd suggest to anyone here to open a paper account and trade that PMA strategy for a year, and then compare it to your real portfolio's returns. I don't post here to be the smartest guy on the Internet. I am not concerned about my theories being "right" other than to make money, and I would hope that things I post tend to make other people money rather than losing it. I think it is vital to be open to new ideas, and drop the ones that don't work like a hot potato. But some people here definitely let their dogma run over their Karma. Bottom line: If you ignore weekly options expiry as a price guide - not to mention, ex-LEAPS expiry - regardless of why it happens, you are a fool. 1. Pompous post indeed! 2. The great privilege of being a market maker enables profits via their bid ask spread. The greater the volume, the more spread they catch and profits they make. They also hedge open positions and lock in profits. They do not need to manipulate the stock to make profits. It is already a great business. The option trading volume does not mysteriously lead to evil manipulation. Apple had a fantastic run in 2012 in which the stock went up greater than 50% in almost a straight line. Had market makers not hedged, they would have been destroyed. The evil manipulation that you imply simply does not occur to the degree that you and others imply. Of course, we will have to agree to disagree. 3. I did not compare option pain theorists to those that believe in Santa Claus, ghosts, etc. Do you believe in them? I compared the conspiracy theorists. There is a difference. 4. I agree with pain theory as far as the resulting impact on price. According to your post, that's all that matters. In my view, max pain occurs largely from the mechanical unwinding of open option positions, not evil manipulation. 5. Yes, when investing/ speculating, it is more important to make money than being right. I hope your making money.
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Post by lance on Feb 18, 2013 9:30:29 GMT -8
Thanks to President's Day AAPL wasn't able to drop today!!!
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JDSoCal
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Post by JDSoCal on Feb 18, 2013 10:25:03 GMT -8
Thanks to President's Day AAPL wasn't able to drop today!!! Except that AAPL tends to go up on Mondays.
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Post by artman1033 on Feb 18, 2013 12:34:36 GMT -8
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Post by lovemyipad on Feb 18, 2013 12:48:18 GMT -8
WHOA! Intense preoccupation with a narrow subject, one-sided verbosity, restricted prosody, and physical clumsiness are typical of the condition, but are not required for diagnosis.My guess: anyone with over 100 posts here has this problem. LOL! Was referring to the difficulty comprehending figurative (versus literal) language, such as analogy/ metaphor used in behavioral finance. E.g., Mr. Market, Evil Overlord, Two Guys Who Like to Fix Trucks*, etc. *One of my fav posts of all times! ;D
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Post by Deleted on Feb 18, 2013 13:12:27 GMT -8
Not disputing good old Graham's theory, but wondering how that theory stacks up against a firm that has a habit of entering/creating, then dominating said markets, thereby generating new sources of revenue not included in previous revenue periods. Until 2000 Apple was a Mac company - one product category/one revenue stream. It then became a Mac and iPod company, thereafter adding digital music (iTMS) to its revenue sources - three product company/three revenue streams. Then along came the iPhone and the App Store, and then the iPad with its attendant app sales. The original iTMS had dropped the M from its name as Books, Movies, TV content and Mac software was added to its digital offerings. Eight product company/eight revenue streams. Now Apple seems poised to add yet another revenue source to its highly successful stable with some kind of TV product, and search, and advertising, nine (maybe 10, 11 or 12) product company/9, 10, 11 or 12 revenue streams. How does Graham's theory (which I don't have a problem with, if properly applied) address this scenario? Frankly, I don't think it does, because it looks at actual earnings from a single product company (can anyone say MSFT?), and not the rate of growth of said earnings, caused by entering/creating new revenue streams (isn't that why firms buy competitors or diversify into other industries?). Graham's theorem would certainly apply if Apple remained a one product company, like maybe ... Amazon, or Google. But it isn't. Taking into account Apple's apparent ability to lead industries in new directions time and time again, I don't think Graham applies at all. I agree, that article showed a case when applying the theory would be foolish. If apple had remained simply a company based on one mature product line in one mature industry, then the theory may hold some weight. However trying to claim that apples recent explosive growth from the iPhone or iPad should be mostly discounted and taking average earnings over the last 5 years as a baseline for investing is retarded. I would simply refute it by asking what the iPhone and iPad and App Store would be worth if those product lines were started as separate companies instead? Calculate there profits and growth rates, get your independent valuations, and then add those to the existing Apple business made up of Mac, iPod & software/iTunes, and then come back to me with a valuation. Oh, and don't forget the $150 per share in cash. Oh and don't forget about potential from future product lines. Much like in an upswing, many bull theories look to be correct, in a downswing many bear theories are being touted as correct. But most theories are bogus.
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Post by Deleted on Feb 18, 2013 13:43:17 GMT -8
But most theories are bogus. No way I can argue with that.
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Post by Apple II+ on Feb 18, 2013 14:02:43 GMT -8
Again, why bother trying to manipulate the largest market cap when you can do so with countless other stocks that trade <$10M in volume per day? AAPL trades that volume in the first second of trading each day. Because no other company has anywhere near the options volume that Apple does. MM's didn't single out Apple as some prime target for manipulation out of thin air, "muah ha ha, this looks like a great stock to fuck with (twirling mustache)." Options buyers trying to become the next Snipus created the situation. MM's are just responding... Let's not forget that, according to Jim Cramer, Apple is special when it comes to FUD-based manipulation. Cramer said that hedge funds, safe in the knowledge that Apple, unlike other companies, simply would not respond, should plant stories with Wall Street reporters to deliberately drop the stock, stories that the reporters want.
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Post by appledoc on Feb 18, 2013 14:27:20 GMT -8
Eh, I'm still going to maintain that small caps are far easier and far more often manipulated than large caps. You don't even have to float FUD to the media. You just sell huge blocks of shares and watch the price tank.
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Mav
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Post by Mav on Feb 18, 2013 15:01:25 GMT -8
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Post by artman1033 on Feb 18, 2013 15:15:43 GMT -8
LOL!
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Mav
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Post by Mav on Feb 18, 2013 15:48:41 GMT -8
Saw the new iPad ads, anyone?
I think they work.
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JDSoCal
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Post by JDSoCal on Feb 18, 2013 16:21:06 GMT -8
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Post by lovemyipad on Feb 18, 2013 17:10:08 GMT -8
IMHO, AMZN's descent from parabolic blow-off top has commenced. GOOG soon... Maybe bear put spreads would be appropriate about now? See technicals area (Other Stocks) for my notes on timing.
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Post by Red Shirted Ensign on Feb 18, 2013 17:20:49 GMT -8
Saw the new iPad ads, anyone? I think they work. I like the emphasis on the beauty and variety of the ecosystem. The back and forth between Ipad and Ipad mini is effective, too. Hey, they are all Ipads and they run the same IOs version and the same apps......Pick your size, capacity, color... My only complaint is that the visuals move so darn fast...I even get dizzy watching the clothes washer turning so you can imagine the impact on me...
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Post by Deleted on Feb 18, 2013 17:27:10 GMT -8
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Mav
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Post by Mav on Feb 18, 2013 17:35:46 GMT -8
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Post by Deleted on Feb 18, 2013 18:20:55 GMT -8
This time last year apples iPhone growth was hugely impressive. This year its much less so, and even in some high subsidy markets like the EU5, apple ended 2012 with less marketshare than what it had 12 months earlier. Something has obviously changed. Not in the USA, but everywhere else.
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Post by jeffi on Feb 18, 2013 18:54:55 GMT -8
This time last year apples iPhone growth was hugely impressive. This year its much less so, and even in some high subsidy markets like the EU5, apple ended 2012 with less marketshare than what it had 12 months earlier. Something has obviously changed. Not in the USA, but everywhere else. This is true and troubling and largely (but not entirely) provides the explanation for the stock performance. I hope and expect Apple will have an answer, but I am cognizant of the possibility that they don't.
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Post by terps530 on Feb 18, 2013 21:00:11 GMT -8
Lastly, stop complaining about option pinning. Since open option interest is transparent you can game it, front run it, and profit from it. In other words you have the advantage! Just caught up on the weekend thread- great stuff. I'm with you on the mathematics angle that the numbers have to add up. Lately I have been trying to track open interest for a particular strike. What I have noticed though in my first two weeks of tracking data, is that the open interest pain will shift, sometimes daily. My plan is to plot the shift of this, day-to-day, as a trend. However, if this is going to move day-by-day, how can you front run it? For example, 1. I can go here and see the numbers each day for March expiration (Mar 16th). www.maximum-pain.com/option-data.aspx2. As of tonight, max open puts is at 450, max open calls is at 600, and a 485/490 level yields the least cost for the market makers writing the options,. and thus the max pain cash loss to the options buyers. 3. Day by day this will shift, and shift more quickly as expiration gets closer. 4. Usually this level will go up as aapl goes up, or down as aapl goes down. So, how do you front run these numbers? My thoughts would be that based on these numbers, you are more likely to be safe below 450. But if aapl drops, then that level is going to drop too. In the end, it seems like I would be just doing an over-complicated version of an in-the-money BCS or BuPS. Or would you be rolling in and out of positions as the open interest thresholds changed daily? I see how Open interest matters. I see how Open Interest changes. I would like to see how to get ahead of it, or get a safe distance away before getting hurt. edit: I got a bit thrown under the gun at work last week so my intraday activity will probably be less until I finish up some immediate work stuff.
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JDSoCal
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Post by JDSoCal on Feb 18, 2013 23:46:35 GMT -8
Just caught up on the weekend thread- great stuff. I'm with you on the mathematics angle that the numbers have to add up. Lately I have been trying to track open interest for a particular strike. What I have noticed though in my first two weeks of tracking data, is that the open interest pain will shift, sometimes daily. My plan is to plot the shift of this, day-to-day, as a trend. However, if this is going to move day-by-day, how can you front run it? For example, 1. I can go here and see the numbers each day for March expiration (Mar 16th). www.maximum-pain.com/option-data.aspx2. As of tonight, max open puts is at 450, max open calls is at 600, and a 485/490 level yields the least cost for the market makers writing the options,. and thus the max pain cash loss to the options buyers. 3. Day by day this will shift, and shift more quickly as expiration gets closer. 4. Usually this level will go up as aapl goes up, or down as aapl goes down. So, how do you front run these numbers? My thoughts would be that based on these numbers, you are more likely to be safe below 450. But if aapl drops, then that level is going to drop too. In the end, it seems like I would be just doing an over-complicated version of an in-the-money BCS or BuPS. Or would you be rolling in and out of positions as the open interest thresholds changed daily? I see how Open interest matters. I see how Open Interest changes. I would like to see how to get ahead of it, or get a safe distance away before getting hurt. Forget 600, with all those 500's sitting there (March and April), I'm thinking I'm going to sell some 505 covereds. I also like a 440/450 Bull Put Spread with that 450 put wall. This is what I am doing. YMMV. "What's good for me ain't necessarily good for the weak-minded." --Gus McCrae, Lonesome Dove
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