Category Archives: AAPL

Apple Pie – Bank Heist

bonnie and clydeI was wondering about insider trading today. Just a thought; a handful of people, Apple insiders, who are at this moment fully aware of what the market will do in 1 hr. Not just Apple. Lets say you’re in the know for the earnings which are due short(ly). Obviously you can’t trade Apple, but as a market moving stock could you just trade the index ahead of the announcement and be free-and-clear of any impropriety? A harmless quicky… I have no idea, but it’s a perfectly simple question. That question lead me to another market moving curiosity.

Did you see that ES flash crash after the fake AP tweet? I’m surprised it’s not bigger news. 260,000 ES contracts traded, $20 billion notational changed hands, and lots of traders got screwed as their stop losses got triggered. And that’s just the S&P futures market! Bonds, European Futures, Forex, VIX, Oil, everybody got hit for 3 minutes. Oh well… In those 3 minutes well over $1 trillion changed hands! Some serious commission…

Obviously most of those trades were algo driven, so maybe the weak link in High Frequency Trading (HFT)  isn’t the speed, or buggy trading programs (Knight…) after all, but the social media resources HFT uses to drive it’s algos. Just sayin, if you’re a bad guy, why try to hack an exchange, a fund, a market moving enterprise, or bank? Hack a Twitter account.

They might just find the culprit by looking at who really, I mean really, profited from that tweet. We just experienced a modern-day bank heist. Hello good guys? Maybe you should be googling B099i3 & C1yd3

Have fun into Apple’s earnings, I personally can’t wait till it’s over.

Apple Options Activity

This just out from Reuters. I can’t find a Reuters link so I’ll quote the article. I think it has a good pulse on the AAPL investor.

Here’s a link to Doris Frankel’s blog

Apple options beckon eager investors, no matter how small

    By Doris Frankel July 23 (Reuters) -

Roger Carlsen, a retired investor in Frankfurt, Illinois, has happily watched his holdings of Apple Inc <AAPL.O> rise to more than $600 a share, having held the stock for 12 years.

But with the company’s earnings report due Tuesday, he’s not sure the stock has much further to go. So he’s been in the options market, selling call options to take some profits because he expects the shares in the world’s most valuable company to have peaked, at least for now.

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Is 5% the New 1%?

Judging from the overwhelming optimism it’s time to buy!

  • AAPL is going parabolic and is now worth more than Poland (Apple has 2 products)!
  • Europe is safely contained thanks to the ECB’s LTRO.
  • It’s an election year and with oil prices are at a near all time high – Mr. Obama will likely tone down the war mongering.
  • VIX is relatively low.
  • Renewed confidence in the EUR.USD

But here’s what reassures cynics and contrarians:

  • A recession in Europe will impact the US growth prospects to a greater degree than presumed. Ford is projecting a loss of $600M.
  • Commodity Markets are jittery. GC_F and SI_F fell off their chairs yesterday.
  • IPhones and IPads do not represent a solid market foundation, $AAPL does not create jobs, in fact their Jobs has moved on to better things (hopefully).
  • Housing and Employment. 54% employed 18-24?
  • And my favorite: Even with a 5% correction in the $SPY we’ll still be in a bull market, that leaves a good reversion to the mean.

One thing I’ve learned from losing money is to avoid betting against the trend or calling the top/bottom. That’s a fools game and you’ll be stopped out quickly. On the other hand, now is the perfect time to buy some protection for expiration on the April, May and January time horizons.

The levels that I’m watching on the $SPY are:

  • 138.22
  • 136.63
  • 135.80
  • 134.25
  • 133.72
  • 131.50

VIX Chart

Is the VIX Flashing a Warning Sign?

For the entire length of this 3 month rally, the upward steps have lingered under 1% and usually under .5%. Only in the last 10 days has the VIX started to signal caution. The VIX is now solidly over 20 and approaching it’s recent high of 22.

Yesterday at the close we saw an unusual large pop at the close, and today we saw AAPL collapse 25 points in 5 minutes. AAPL lost it’s luster very quickly today, and that’s worrying… Euphoria is the word I’d use. Everyone has AAPL, literally, so sell. It’s hard to write that, given how popular, rich and well regarded that stock is. For how long the euphoria might continue is hard to say, but I read here that they accounted for 90% of the gains for the NASDAQ in yesterday’s trading. Strange. Buy some protection if you’re long AAPL.

VIX Chart

Option expiration is coming up this Friday, and tomorrow’s PPI and claims numbers risk to add fuel to this VIX fire.

Contradiction

Aren’t fixing inflation targets and locking down interest rates contradictory statements?

I am very sceptical of this little bounce off the words ‘historic’ which are crossing the wires. “In historic shift, fed sets inflation target.” Wow. So if I understand (which I obviously don’t) on one hand, we’re printing money, for more jobs and to save the banks, fine. I can buy that. But we’re also printing money and have been for a few years. This is inflationary. Period. It raises our default risk but with luck will lower our $15,000,000,000,000.00 + national debt, great. Inflation will also makes pickles, beef, homes, etc. more expensive, and I like pickles. So how is setting an inflation target at 2.0% even remotely believable? This is pure marketing. I can print because I have a target. There’s a 100% chance they won’t hit their target.

For the moment the markets are buying it. It’s Dollar negative which is boosting the Euro, Gold, and Silver.

Update: Very well said ZH!

Not sure what to make of a market that traded relatively poorly on strong apple earnings but managed to rip higher on a relatively neutral fed statement.

Greek Bank Exposure THEN; Eurozone Crisis NOW

What’s going on with the Euro? Early this summer the question was: do banks have a dangerously large exposure to Greece? In June the numbers were very maneagable. Now “all of a sudden” they’re un-maneageable. What’s changed? If anything you would think, European banks have been managing their risk favorably since well before June. They were warned.

This June article from Reuters cites between 40 and 100 Billion but with little consensus.

  • “The main conclusion I draw from all this is that no one really knows what the effects of a Greek default would be — but that non-Greek banks are unlikely to be the main vector of any contagion. And while Kash is worried about US banks’ derivatives exposure, I’m pretty sanguine on that front, too.”
So I went back to Kash, who seems to follow this unravelling seriously. He’s asking what caused the crisis, and whether there is a local or systemic problem with the Eurozone, whether capital flows or budget deficits have played a role. We’ve moved on from the banks. But his conclusion is interesting.
  • “The eurozone debt crisis is big enough that there’s plenty of blame to go around, and some of it certainly should go to the crisis countries themselves. But it must also be recognized that as soon as those countries adopted the euro, powerful forces were set in motion that made a financial crisis likely, and very possibly unavoidable, no matter what the governments of the peripheral euro countries did. Irresponsible behavior by the periphery countries did not set the stage for the eurozone crisis; the common currency itself did.”
The common currency set the stage for the crisis. As a trader how should I consider this? Is the common currency starting to die a slow death? I find that hard to believe given the budget deficits of the US, and the rise in Gold as a popular safe haven. Alternatives make for good competition and taken together the Eurozone budget deficit looks small in comparison.

 

Atleast in the short term, shorting the Euro ($EURUSD) in favor of the dollar feels counter-intuitive after it’s recent decline, even in-light of the Eurozone problems.

 

American bloggers and the popular press like to scream that the Eurozone countries are unable to work together and as a result the common currency is destined to implode. At the same time, dear pundit, look at the pissing match in Washington…

 

I’m still not sure where the risk is higher.

 

ZeroHedge has a great article on current risk perceptions. My favorite quotes from this posting are on Margin Debt:
  • Although margin debt is coming down it is still historically high and at levels that preceded major selloffs such as September 2008. In fact margin debt is now higher than that of the dot com boom.
  • As long as stocks like AAPL continue to set all time highs I believe there is no real fear in the equity markets and thus no forced equity liquidations yet. AAPL may be the best company out there but there is little to no short interest to support selloffs and with everyone all in on the long side and leveraged once selling begins it will be fierce. Remember AAPL is the ATM and when people need to raise cash to meet margin calls they are forced to sell their most liquid position.
This is very true for $AAPL investors. Watch out.