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Post by lovemyipad on Oct 4, 2013 15:21:28 GMT -8
The bar is open!
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Mav
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Post by Mav on Oct 4, 2013 15:40:45 GMT -8
Up 28 cents!
Inverted hammer on the weekly? Blech.
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Post by Deleted on Oct 4, 2013 16:04:20 GMT -8
I'll take the 28c!
3 green weeks in a row, first time since May.
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Post by Deleted on Oct 4, 2013 16:23:22 GMT -8
I'm wondering if the A7 is the one SoC to rule in all of Apples forthcoming products?
With a 4 core GPU It seemingly has enough power to drive the iPad 5 retina display without the need for an additional A7x variant, the battery efficiency gains of an iPhone class processor in the 9.7" iPad could be significant.
Likewise the A7 might sit quite nicely in a new Apple TV.
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Post by mcharliem on Oct 4, 2013 19:17:23 GMT -8
It seems like people bring up max pain and weekly pinning a lot, so I thought I'd through my two cents in.
One thing that I briefly brought up a few days ago, but doesn't get nearly enough attention is how the vast majority of large option players use delta neutral strategies. This means that while they take on huge options positions, sometimes with large positive or negative gamma and theta, they're constantly hedging their positions to bring the overall delta as close to 0 at all times. These option traders get their edge from any number of places, but it's not from choosing a stock's direction. As far as stock picking, their primary concern is NOT losing money, hence their preference for going home every night with flat deltas.
Why is this important? Because it's the primary reason pinning exists, but ironically it's for the opposite reason that most believe. I feel like a lot of people look at end of week options pinning and say, oh it's all the option writers trying to pin the stock to make the contracts they're short worthless. This absolutely isn't true. If an option player is short a bunch of calls at an at-the-money strike, every cent that stock moves up and away from that strike price, the gamma of their short options is causing their deltas to go more and more against them. For them to then try and short the stock to bring it back to the strike price, would just be making their deltas even MORE against them. This is the opposite of hedging. But more importantly, this is a classic sucker's trade. It's a trade with a high probability of a small winner, and a small probability of a large loser. Trading firms HATE these trades, because it's so hard to judge the profitability of them because they're always at risk of huge blow ups when things go wrong. It's extremely hard to accurately estimate either the likelihood or the magnitude of a blowup, let alone both which you need to judge a strategy's profitability.
So what does cause the pinning? Anecdotally, it obviously exists, and it's actually the long holders of the at-the-money contracts that are causing it. An option's gamma is greatest when it's at the money, so when someone is holding a bunch of contracts at the money and the stock moves higher, their delta is going to move in their favor very quickly, because their gamma is abnormally large. This means they're going to have to hedge more aggressively than normal, which means when the stock goes up, they sell, and when the stock drops, they buy. This is what causes the pinning.
Yet another thing that goes against the idea of shorts pinning the stock at a strike price is the idea of "pin risk". As I've mentioned before, these large option players want to stay delta neutral as much as possible. Imagine a scenario where an options player is short 1,000 AAPL 500 calls and the stock closes at 499.98 on expiration. Everyone would think, that's great, right? All these contracts they are short basically expired worthless. Now let's say in after hours the stock trades up a few cents and prints around between 500.10 and 500.25. Here's the problem... this options player, who needs to be somewhat delta neutral or face the wrath of their risk manager, has no idea what their AAPL delta will be come Monday morning. The stock closed at 499.98, so brokerages won't automatically exercise any of those 1,000 calls. But the stock was up slightly in after hours, so plenty of those 1,000 calls may get exercised. But they won't get notice until Saturday morning, way after afterhours trading has closed when they could hedge. They may get assigned on 200 or they may get assigned on 800. The difference between those two scenarios is 60,000 delta. If they knew, they could hedge, but they don't know and that's a disaster. That's why, ironically, for an option trader going into expiration the WORST thing to happen is to be short a ton of contracts pinned at the close.
So what does all this mean and how do you interpret it? It's all about the gamma. If it's option expiration Friday and AAPL is trading at 508 and there are 80,000 500 strike calls, you might be tempted to think, oh those option market makers are going to try and push the stock down because 8 points lower and all those call expire worthless. But in reality, if it's Friday those calls have so little gamma left in them that the option players have basically written them off as 100 delta contracts and they're already completely hedged 1 to 1 with stock. Now, when the stock is trading around a strike price approaching expiration, there will be that pull towards the strike because of all the hedging from the elevated gamma, but the further it gets from the strike, the less of a pull there will be. Overall, the effect gets greater as the minutes tick towards the close and the end result is it's much more likely to bring a stock from 500.50 at 3:50 pm to 500.00 at the close than it is to bring a stock from 496 at the start of the day to 500 at the close. Overall, I think most on this board are placing too much emphasis on it because they see the closing pins and that is exaggerating the actual effect of what's going on.
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Mav
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Post by Mav on Oct 4, 2013 19:46:29 GMT -8
Not necessarily.
Remember January?
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Post by macziggy on Oct 4, 2013 21:51:13 GMT -8
Anybody see this yet? NY Times And Then Steve Said, ‘Let There Be an iPhone’
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Post by nagrani on Oct 4, 2013 22:49:57 GMT -8
Charlie - your one post was worth a thousand others. Thank you for that insight
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Post by rob_london on Oct 5, 2013 2:40:20 GMT -8
Anybody see this yet? NY Times And Then Steve Said, ‘Let There Be an iPhone’ A tweet from Jeremy Wyld, who was a member of the original iPhone team: "Everyone reads the NYT article thinking it was awesome and not realising it was a living hell for months on end".
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Post by appledoc on Oct 5, 2013 3:05:38 GMT -8
Too bad that post will be ignored by the masses and we'll continue to hear the same bitching over and over again.
Beautiful explanation. Thank you.
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Post by rickag on Oct 5, 2013 6:17:01 GMT -8
mcharliem
Thanks for the post. Unfortunately I will have to re-read multiple times to get a better grasp.
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Post by Red Shirted Ensign on Oct 5, 2013 7:08:49 GMT -8
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Post by Deleted on Oct 5, 2013 7:12:10 GMT -8
Two key points made here re: McHarliem's post.
1. Pinning obviously exists. 2. The volume of contracts on the weeklies represents a tractor beam that's not helping simply because the influence on the stock is not neutral. You don't see this phenomena with Google, Amazon, etc.
The reasons for it are still speculative but is it even important in light of 1 and 2 above?
I'm humored by those who believe the weeklies aren't having a negative impact on this stock.
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Post by jdrizzo89 on Oct 5, 2013 7:29:00 GMT -8
I have mentioned a pretty definite study on this multiple times along with my own little study on the effect since weeklies have been introduced. Here is an article discussing the definite study I mentioned Key paragraph This clustering does not automatically mean that these stocks are being manipulated, the researchers say. It could also be caused by straightforward hedging transactions that are regularly undertaken by market makers on options exchanges. It could also be caused by straightforward hedging transactions that are regularly undertaken by market makers on options exchanges. In short, anyone who believes it's evil overlord manipulation or who believes no strong relationship of pinning exists with AAPL is equally as ignorant and uninformed www.nytimes.com/2006/05/07/business/yourmoney/07stra.html?_r=1&
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Mav
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Post by Mav on Oct 5, 2013 7:46:55 GMT -8
Bear in mind this is a 2006 study. The trading world has changed since then. HFTs, sigh.
I take it week by week. January OpEx: 500.00. Coincidence of the century.
This week? Incredibly mired in uncertainty - I suspect many of us _think_ all will be OK-ish enough in two weeks, but no one _knows_ for sure. That's not enough for the market to do that much more than remain in watch-and-wait mode. And AAPL's still caught between earnings, iPads, and the "show-me" mode it's been in since the downtrend started.
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Post by artman1033 on Oct 5, 2013 8:05:23 GMT -8
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Post by Red Shirted Ensign on Oct 5, 2013 8:05:36 GMT -8
I'm intrigued by the fact that Apple's average daily volume has backed off considerably in the past year. From what was, say, 20 million shares at a price of 550, we now see 14 million at a price point of, say 450.
The crackdown on HFT? Loss of interest in Apple as a security? Options hedging? Mercel slowing his daily purchases?
Total dollars involved in trading the stock is far less than we saw from 2009-2012. Markets have seen lower overall volumes as well, but there are certainly various factors here....and what if our average daily volume went back up to 20 million?
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Post by Deleted on Oct 5, 2013 8:10:56 GMT -8
There are a multiple reasons for AAPL trading where it does. Clearly, institutions are lightweight on it. I'm not sure why, but it probably explains a big part of things. Learn the reasons why institutions have less faith in Apple than they do in Microsoft and Google and we might get somewhere.
Yes, Apple, Inc. had a flat year. Yet, Google's EPS growth was 3%, so despite it being positive, isn't 3% flat? Despite that, GOOG climbs approx. 50% in the same period YOY.
Sentiment is big in a market as unhinged as this one. It's not something I would ever use in a formal valuation of a business, as intangibles are difficult to quantify and can change quickly. The media has done serious damage to Apple's sentiment value because negative news sells and Apple is a celebrity company.
I grant you that Apple's fortunes are currently concentrated in smartphones. That's a risk. Yet, sales still grew in FY 2013 and managed to put up decent profit #s despite margin pressure (probably a healthy thing in Apple's case). If one looks at historical margins, Apple is doing just FINE at 37- 39%. Apple could quite easily see 40% gross margin in the December quarter.
Apple is in the driver's seat when it comes to mobile and is positioned well to expand its business into enterprise. It has the biggest, baddest balance sheet to disrupt other product categories and markets without breaking a sweat.
Options play a role in how Apple trades, but there are better explanations to understand Apple's valuation today.
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Post by Red Shirted Ensign on Oct 5, 2013 8:13:45 GMT -8
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Post by Deleted on Oct 5, 2013 8:21:15 GMT -8
I just gave Rene an "attaboy." I was thinking, can you just imagine if Apple laid an egg as big as Samsung recently did with the Gear device? Just proves how big a target Apple is, and the others have teflon armor.
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Mav
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Post by Mav on Oct 5, 2013 8:25:25 GMT -8
OTOH, AAPL's multiple is now in the realm of the fairly ridiculous. That should count for something when, y'know, China Mobile. ;D
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Post by Deleted on Oct 5, 2013 8:35:47 GMT -8
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Post by Red Shirted Ensign on Oct 5, 2013 8:43:37 GMT -8
Apple has the completely unfettered ability to enhance iRadio as we go along....it's only going to get better and easier. More countries added? Sure, just as soon as legal ends are tied up. And, I am buying more music now than I have in years. It's too easy to just push down that finger and give up another $1.29! Why do I like the White Stripes! ( no Klingon opera yet...)
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Post by Deleted on Oct 5, 2013 9:09:50 GMT -8
BlackBerry is on the mat. This time, a class action lawsuit aimed at punishing the rosy forecasts by management. Too bad Peter Misek can't be included -- that analyst has lost more money for investors following him on BBRY --and RIMM before that-- than anyone I can think of.
Misek has been relatively quiet of late....is he in hiding? He should be, giving BBRY a $18 price target on BBRY as recent as last June. This guy should be run out of town.
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Post by Red Shirted Ensign on Oct 5, 2013 9:09:51 GMT -8
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Post by Red Shirted Ensign on Oct 5, 2013 9:16:56 GMT -8
BlackBerry is on the mat. This time, a class action lawsuit aimed at punishing the rosy forecasts by management. Too bad Peter Misek can't be included -- that analyst has lost more money for investors following him on BBRY --and RIMM before that-- than anyone I can think of. Misek has been relatively quiet of late....is he in hiding? He should be, giving BBRY a $18 price target on BBRY as recent as last June. This guy should be run out of town. Every time Apple does something that ticks off the complacent user.....lightning connector, iOS7 redesign, etc., I feel better about the future. The story of Blackberry's fear of change and evolution is a testament to how a company dies from the inside out. Where will all those blackberry users go next? What will IT managers support? Not loosey goosey android
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Post by artman1033 on Oct 5, 2013 10:16:50 GMT -8
OH! NOOOOOO! Chinese entrepreneurs are converting iPhone5 into iPhone5S Gold with a $2.00 sticker! Apple is doomed!
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Post by macziggy on Oct 5, 2013 11:04:24 GMT -8
I received this startling AP alert two years ago. I just sat looking at my screen for a long time before I could unlock my iPhone. Thanks, Steve!
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Post by Deleted on Oct 5, 2013 11:18:53 GMT -8
There are a multiple reasons for AAPL trading where it does. Clearly, institutions are lightweight on it. I'm not sure why, but it probably explains a big part of things. Learn the reasons why institutions have less faith in Apple than they do in Microsoft and Google and we might get somewhere. I stated my thinking on why the institutions were avoiding AAPL, and was asked "what universe I was from". Do YoY compares of each quarter, going back 5 years, and the answer to your question leaps out of the page. Make sure your compares are Income Statement line items, top to bottom. I'll say it again: F2013 was a flop. Institutions saw it coming, and when the second quarter (in a row) confirmed it, they bailed. The evidence is in the YoY compares, the timing of the great fall (in conjunction with those YoY compares), the drop in institutional ownership from ~71% to ~61%, lower daily average trading volume, and analysts like Doug Kass (who we all, including myself, said was an idiot) that called it. CNBC talked about it, but in the shallowest terms, giving no specifics (aka worthless commentary).
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Post by Deleted on Oct 5, 2013 11:47:58 GMT -8
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