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Monday Market Madness – Apple $500 Takes Down the Nasdaq

Look out, run, PANIC!!!

Apple's stock has dropped 4%, all the way down to $497 pre-market as Reuters is reporting that the Nikkei is reporting that AAPL has slashed orders for new IPhone displays by 50% as well as other components.  Of course, AAPL never comments on rumors and today is a holiday in Japan so no comments from the suppliers either but the MSM is running with the rumor and the thinly-traded AAPL futures are taking a pounding, and dragging the Nasdaq futures down with them and that's dragging down our other indices and giving us a generally crappy open

The chart on the right is from MacStories, with a nice write-up on the 2013 outlook, while the chart on the left was in Fortune this week and indicates actual sales (or actual projected sales) for Q4 of about 50M phones and, if you take the Nikkie article at face value, Q1 sales will drop off as fast as Q4 took off – despite the fact that the IPhone 5 only rolled out in late November.  

Also a very important point made by Forbes is that Q1 2012 was a rare 14 weeks and Q1 2013 has only 13 so AAPL has a 7% handicap out of the gate.  We will, of course, be BUYBUYBUYing more AAPL at $500 as there is no news here and perhaps there is a kernal of truth in the rumor (there is in all the good ones) but likely it's related to AAPL selecting another supplier or shifting their focus to the also-rumored new IPhones that also haven't been confirmed yet or perhaps even this is just a misinterpretation of AAPL's normal business cycle, in which Q4 is their big sales quarter and Q1 and Q2 are simply lighter.   

What we can do right now (8:15) is to go long on the Nasdaq Futures (/NQ) off that 2,725 line – as that's where AAPL is bouncing at $500 and makes an easy signal to get out if it doesn't hold.  AAPL's 4% drop is a 0.8% drag on the Nasdaq and there's no other reason for the index to be dropping as the other news this weekend has been fairly benign.  

WIR_Key LevelsThe Shanghai, in fact, popped 3% this morning and India's Sensex was up 1.23% and the Hang Seng was up 0.64% and the Nikkei, as I mentioned, is closed for rumor-mongering.  It's good to take a vacation after last week's whopping 3.88% gain and Europe is also kicking this week off with a bang, with Germany and France up 0.4% and the UK flat-lining, despite another dreadful report on Industrial Output – which was down 0.3% but old news as that was November and much better than October's 1% decline.  

Chicago Fed President Charles Evans says the Fed could end its bond-buying if the economy creates another 1-1.5M jobs over the next six months to a year. "That would be indicative that we could stop," says Evans. HOWEVER, he forecasts that unemployment won't drop to 6.5% until mid-2015, which would mean that under the Fed's plan of linking monetary policy to the jobless and inflation rates, the bank could keep interest rates close to zero for another 2.5 years.

It's going to be that kind of week, with a lot of "howevers" as we wait for earnings but don't let these rumors fool you – facts are coming…

 


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  1. lflantheman

    AAPL……"Go ahead AAPL.  Make my day" ……"Drop under $500, so I can buy buy buy!" 

  2. stjeanluc

    Oil Lines

    R3 – 95.54
    R2 – 94.74
    R1 – 94.25
    PP – 93.45
    S1 – 92.96
    S2 – 92.16
    S1 – 91.67

    Friday's high and low – 93.94 / 92.65

  3. stjeanluc

    AAPL / lflan – Looks like your chance of buying below 500 are diminishing as it's already coming back!

  4. wombatcreative

    good morning guys
    5am here on the coast 

    AAPL – when does it end ? so, no buying up more 'one stock' on the stories Phil ?? Those $450 puts are still pretty juicy …

  5. stjeanluc

    At guess growth at all costs is having some consequences:

    http://www.scmp.com/news/china/article/1127398/smog-threat-remains-beijing-issues-first-ever-orange-alert

     

    As thick smog choked the capital and many mainland cities for a third straight day, Beijing yesterday issued its first-ever orange fog warning – indicating that visibility was less than 200 metres.

    The conditions disrupted air traffic, forced the closure of several highways and sent countless residents scrambling for their surgical masks.

    Air-quality readings released by the capital's municipal environmental monitoring centre showed the level of health-threatening PM2.5 particles, or those smaller than 2.5 microns, was 500 in the south of the city, or the upper limit of the scale. In the northern part, the level reached 440, meaning the air quality was a threat to health.

    I remember my first day and Beijing and how bad the air felt walking in the streets. Luckily, it cleared up over the next couple of days and it was much better. But one my friends who lived there moved as soon as his first child was born because of the pollution.

  6. Pharmboy

    PP for today:

  7. yodi

    lflantheman
    AAPL you missed it

  8. stjeanluc

    Income Portfolio news:

    HPQ - Upgraded from Underweight to Neutral at JP Morgan.

  9. 1020

    Good Morning!

  10. Savi

    Good Morning from Hilton Head
    yikes whats with AAPL

  11. stockbern

    NTE, another PSW favorite.. Down about 11%

  12. yodi

    Phil INFY jumped over 8$ on Friday from 43 to 51 any play in view?

  13. stjeanluc

    NTE / Stockbern – All of AAPL (or smartphone related) suppliers are down this morning it looks like!

  14. Opesbridge

    Phil/GLD – Currently eyeing the 1675-80 level in /YG to throw a cover on our GLD Jun 145 long Calls. What's your take on a good cover for these? (We were previously covered with the $170 Calls)

  15. stjeanluc

  16. stjeanluc

    Big sting from AAPL as expected!

  17. stjeanluc

  18. stjeanluc

  19. Burrben

    Morning from New Smyrna Beach, FL where it's 80 and sunny!  I love the warm weather!
    The Jan15 400's are now $50….  but I was the idiot who thought they were a good deal at $25 too…..

  20. stjeanluc

  21. millcreek

    phil,
     
    im holding the aapl 450-600 bcs for jan15 ….(sold the 400 puts)..your thoughts on rolling to lower strikes with the bcs on this pullback……tks

  22. Phil

    Good morning!  

    10 AAPL weekly $420 calls at $2.90 in both $25KPs.  

    Rolling AAPL April $520 calls to $500 calls for $10 in $25KPA and we really must sell something for $10 to pay for that this week.  

    New trade on AAPL is selling 2015 $400s for $52 for a net $348 entry (they'll have $200Bn in cash by then – about $220 a share) and buying the April $500/550 bull call spread for $20 and, if AAPL goes up, it's a quick $30 profit plus the short puts and, if AAPL goes down, then a $30 bull call spread can be added and we still haven't used all the short put money.  

     

     

  23. Phil

    AAPL Money – May as well spend $22 to roll the $500 calls to the $450 calls – no reason not to.  

  24. japarikh

    Hey Phil- what do you think about GNK? Fundamentals aren't very good, but then again, that whole industry has been suffering. Now that there might be some upswing in iron ore exports, do you think they will do well? I was considering a Buy/Write for the Jan 2014 4.0 Calls @ $1.00.

  25. Pharmboy

    At this rate, AMZN will catch AAPL….  GM all…..frickin' cold for San Diego.

  26. yshenhar

    Phil / AAPL are those 420s?
    "10 AAPL weekly $420 calls at $2.90 in both $25KPs."

  27. escohen5

    Yshenhar — AAPL — I believe he meant the 520s.

  28. Savi

    aapl 520s I think

  29. newt

    $520's

  30. Pharmboy

    AAPL is so yesterday.…biotech biotech biotech.  They are green today….

  31. Burrben

    I think this is from a old member of PSW, David Ristu who started his own thing
    Top 2013 picks from Oxen Group
    http://seekingalpha.com/article/1109351-the-top-9-investments-for-2013?source=email_investing_ideas&ifp=0
    (Not a endorsement, I wasn't a fan of his picks at least in the short term)

  32. Phil

    Make my day/Lflan – Exactly!  

    One Stock/Wombat – I think this seals the deal for an AAPL One Stock trade tomorrow.  At $550, it might have bothered me but as a one-stock trade, you can sell (keeping it a one-year trade) the 2014 $400 puts for $28 and buy the 2014 $450/550 bull call spread for $45 for net $27 on the $10 spread that's $50 in the money.  So, if you have a $100,000 portfolio with ordinary margin, you can afford to own 500 shares of AAPL at $400 so you can do this trade with just 5 contracts and they have a potential to gain $36,500 in 12 months.  That's a nice return on $100K and all you have to tie up is $20,000 in margin on the short puts (TOS ordinary margin) and $45,000 cash on the spread so another 56% upside possibility is the same as BAC's last year trade so it has to be fate!  

    Smog/StJ – I guess it's a relatively "good" form of pollution because it tends to get so bad that people actually realize they should do something about it.  

    WSJ/Diamond – So funny how they take a rumor and play telephone with it until it becomes a very harsh headline in a respected paper with virtually no indication that the whole thing is unsubstantiated.  

    Nas futures failed to hold 2,750 after a spike back to 2,735 but now 2,720 but AAPL holding $500 so we'll see. 

    NTE/Stock – This rumor will take a lot people down.

    INFY/Yodi – Not from me – I hate to chase.  They were toppy at $15 though so not much support until 200 dma at $9.

    GLD/Opes – Dollar not too likely to get much weaker (now 79.64) so gold would have to rise on merit, which it has little of.  BUT, low VIX makes for crappy sales so, like the income portfolio, I'd hold off for now as long as we're holding that upper range of our Big Chart levels:  

    As long as we have 3 of 5 of our 5% Up levels (and S&P 1,440 is a long way down, as are the RUT and NYSE failures at this point), then there's not much to get bearish about and that will include gold.  At the moment, AAPL's 3.5% drop is hitting the Nasdaq for 0.7% but the Nasdaq is only down 0.5% so the net 99 other components are UP 0.2% – and that's WITH AAPL suppliers all selling off in panic as well.  What sell-off?  

    AAPL/Mill – If you can afford to buy back the $600s, which have a .42 delta and were $80 just 2 weeks ago, for $58, I'd do that and put a sell-stop on the $550 calls, now $73, at $65 and then you can spend that net $7 and another $20 to roll the $450s down to the $500s and then, for net $20, you've dropped your spread $50 if you have to.  

    GNK/Japar – What could the Fundamentals really be on what is essentially a penny stock with a $163M market cap?  I was warning people not to play them last Feb, when they looked attractive at $10.  Now at $3.76 they are a lot closer to looking like the penny stock that they are with the same $2Bn in debt and even less cash flow (-$158M last Q – the whole company's value!) than they had last year (-$68M) when I didn't like them with a $450M market cap.  Shipping is a very tricky business and these guys have 53 ships, now valued at $3M each – if there were any value to this company, tons of bigger shippers would be snapping them up but there's still a massive glut of ships and no one wants to buy this debt so you shouldn't either.  

    AAPL/Yshen – Oops, yes it was the weekly $520 calls to buy in both $25KPs (now $2.25 so nothing missed).  

    Biotech/Pharm – I'm beginning to think you are right.  In fact, OLED is kind of Biotech and likely to be the new hot thing in TVs. 

    Oxen/Burr – I like his price targets, very confident.  8)  Here's last year's list.

  33. stjeanluc

    Oxen / Burrben – I guess some decent ideas there… But pretty hefty target prices! I am waiting for IBM's earnings to enter a play. I'll probably start with a calendar, buying Jan 15 calls and selling quarterly calls around earnings. I view them as a much safer bet than anything else in this market. Not saying that they can't go down but they have such a range of products/services and all that R&D!

  34. Burrben

    Anyone like TA (Travel Centers of America)?  Maybe it's just cause I got off a "there and back again" road trip from FL to CA, but I like them and saw a S.A. article about them today
    TA Article
    Maybe sell the Jun13 $5 Puts for a entry

  35. albo

    Phil – You mentioned OLED displays.  Any plays you like.  PANL interesting because of Samsung connection, but stock is still expensive despite recent pullback.

  36. wombatcreative

    Phil
    Wehn you get a minute after market
    Can you check the Jan6 newsletter – CIM

    The numbers that I'm getting are way off – for example //
    2015 $2.50 PUTS haven't traded anywhere near .95 on my charts ( I went back 3 months )
    Same with the calls ?
    Problem on my end  ?? //

  37. Burrben

    10% return?
    How about selling the Jan25 2013 AAPL 420 Puts for $1?  Margin looks to be $1K on selling one of them, so a 10% return?  Too sketchy?

  38. stjeanluc

    Oxen / Phil – Looking at all his 2012 predictions, some were very good picks and made his highest target prices but all of them made his lower target price. If you weren't greedy you could have done well with his picks!

  39. millcreek

    phil,
     
    im a little confused i got the buy back of the 600 but i own the jan 15 450 call.  the gist of my question was to see if there was a roll down from the 450-600 bcs to something lower with the aapl weakness…you threw me with the sell stop on the 550's. 
    sorry for the confusion…………tks

  40. malsg

    When Biotech and Apple tech fuse … well kids, resistance is futile!

  41. stjeanluc

    Oil has been doing its own little roller-coaster this morning. All the way to S1 where it bounced up!

  42. albo

    AMRN trying to break out.

  43. albo

    Oops !  Wrong chart – was looking at ARNA.

  44. rperi

    Can you please help me with my AKAM position?  I originally bought the stock a few years back at $49.70.  I spent those years whittling down my basis to $35.61, and I have a short covered call that if exercised would take the stock from me at $30 this week.  I can consider this a loser and let it go with the $561 loss (much better than what I was faced with when it dropped below $26 last year), or I can roll to 2014 $32 calls and $35 puts for $5.10, or 2015 $33 calls and puts for $7.80, but I am not certain I want to hold onto this stock for that length of time.  Is this a company that shows strength moving forward? Any helpful thoughts?  There is no dividend so is there a strategy that would allow me to sell the stock?

  45. lflantheman

    MoMo virtual portfolio:   Based on our established rule that we won't allow a trade to lose more than 3% of portfolio, then NFLX  Feb 95 puts (3) sold for 5.30.  

  46. Phil

    TA/Burr – It's a nice little monopoly business and, of course,whenever you get ripped off for gas or food at a rest stop, they get a cut.  The danger of TA is they are not the biggest fish – that's the real crooks like our beloved Governor, who reward and take away those contracts as donors go in and out of favor, so they are subject to some pretty wild swings so nothing like a risk-free, or even low-risk investment.  They went from $10.40 in Jan 2011 to $2.30 in September that year so nothing stopping them from making you own them at $2.50 if things go south (but a really good deal at that price).  

    OLED/Albo – There was an actual company with the symbol OLED who we loved until they got snapped up by Samsung.  Now the space is pretty much dominated by the big boys and companies like PANL are pretty-much also-rans who tend to Momo with the space but don't have any lasting value.  From last week's action, they didn't have anything to impress people with at last week's CES show either.  Meanwhile, here's Samsung's new curved-screen OLED home theater – like home IMAX supposedly:

    CIM/Wombt – Very, very thinly traded options with wild price swings.  If you can't get good fills – don't play them, because you'll be stuck with whatever you buy on the other side.  It's a shame because I like these guys enough to be my one stock for 2013 otherwise.  I really do think they are about 50% under-priced.  Of course, the 2015 $2.50 calls are just .50, even on a .35/50 bid/ask spread and that's just stupid cheap – even taking the dividends into account, so a nice way to play on a bet with .25 premium (10%) over 2 years and maybe one day they'll take a dip and you can get .50 back for the $1.50 puts (now .30ish).  

    AAPL/Burr – Nice idea for a quick 10% but keep in mind if AAPL drops $50 (and I just warned about that possibility last week), then suddenly your premium jumps up to $11.50 ( margin of $470 puts) and you may be forced to buy back the puts for $7 (price of the $4.70 puts), even though AAPL is still over your strike by $40.  When comparing margins – don't forget that the margin above you collected more money and thus has a lower net than you would have if you begin to take a loss.

    Oxen/StJ – He was a pretty good stock picker – especially in a bull market.  

    AAPL/Mill – I mean there's no reason to risk more money rolling after buying back the $600 caller but, IF we go lower, then the idea would be to THEN bite the bullet and sell the $550s and do the roll.  As it stands, your $450s are deep in the money and will do quite well if AAPL pops back up and, if we get a good move, you can re-sell those $600s for $80+ again.  If not – you have a plan.  

    Obama not helping at all!  

    Oil/StJ – Contracts roll over early next week.  Not sure with MLK day (21st) as we're closed but maybe 22nd is rollover.  

  47. kustomz

    Europe

    UK FTSE -0.1%
    German DAX +0.3%
    French CAC +0.2%
    Spain IBEX UNC.
    Italy MIB -0.6%

  48. lflantheman

    MoMo virtual portfolio trade:   BTO   2 AMZN Feb 275 calls for 11.85

  49. wombatcreative

    Phil
    OneStock/Wombat – AAPL = done, done and done. Skin in the game. Didn't have enough margin for 5 – only 2. Fidelity kills you on naked PUTS.
    CIM – ya, I like them as well but NO volume, I can't get anything filled. I went to the $3, but still no love.

     

  50. millcreek

    phil, got it tks……

  51. sank1

    AAPL Heavy Mutual Funds,
    Any inputs on mutual funds that are heavily weighted (30% to 50% +) in AAPL? I'd like to see how I can re-deploy some of my retirement account balances into such mutual funds. Thanks.

  52. yodi

    rperi
    AKAM I have been playing this stock for quite some time. As you said the stk does not pay any div. So you need to set up plays with artificial calls. You do not give the value of the caller when you sold it. If the caller has still premium it pays to hold out a bit longer. In principal I would say sell the stock and liquidate the caller, the cash you will receive you can set up diferent plays, if you still like the stock. My last play was at the 3rd of Jan with a May13 back/ratio, still playable. 

  53. Phil

    Dow volume at 12:30 is 40M – normal light day. 

    AKAM/Rperi – Quite a ride on those.  Considering they were under $20 in 2011, losing $561 not a bad deal.  If you were so determined to stick with it, doubling down then would have let you out long ago.  People tend to forget the time cost associated with holding a position – especially if it's one that requires your attention.  I always recommend people take some side jobs where they bill by the hour if they can – so they can learn to focus on what their time is worth.  In this case, the time you will worry about this position in the future isn't worth the $561 you're trying to win back.  Do you even remember your original premise?  Next time they sell off to the low $20s – THEN you know the stock well enough to take a look but, at $40 – it's not too sexy…

    Europe/Kustomz – Blew a good start.  

    AAPL/Wombat – Premise is they hold $500, if not, we may want to reconsider.  

    You're welcome Mill. 

    Funds/Sank – There are directories for that stuff but I don't know where. 

  54. wombatcreative

    AAPL / WSJ
    UPDATE – 10:30AM:
     The Wall Street Journal reported this morning that Apple slashed iPhone 5 orders by 50% due to weak demand and the stock has declined more than three percent and even briefly dipped below $500. The rumor states that iPhone 5 component orders were slashed from 65M to approximately 60M. Quite frankly, the math does not add up. The Wall Street Journal article no longer includes the 65M number since I first read it last night, a very interesting development.
    In the past fiscal year Apple sold 127M iPhones. If Apple ordered 65M of components for the quarter and sold maybe 50M iPhones, that would be the best quarter for iPhone sales in its history. A reduction to 30M in subsequent quarters would be in-line with its historical averages and represent bullish activity given the ~15M in extra inventory components ordered previously. Furthermore, the report does not address the fact that Apple uses the core iPhone 5 display in multiple devices. I highly question the validity of such a rumor given that January 2013 expiration and earnings report are so close. If you are currently long Apple I see no reason to sell into the rumor. Even if you believe the rumor, the insinuation that demand for the iPhone 5 dropped by 50% due to competition is false and inaccurate.
    full article on SA here 

  55. 8800

    Phil,
    my question is more about learning the nuances than an immed tactical issue – I am in some Feb 540/600 (and 545/625) bcs as an Q1 earnings play. I realize that if Q1 disappoint the bcs are toast. My rationale is that this should be the strongest Q and I don't want to be in an intermed term long call if Q1 earnings disappoint (much longer term, perhaps), so I don't see the value of rolling to Apr. As you point out, rolling down to 520 gets you $20 potential profit for $10 immed cost; doing so, I assume would be based on one's confidence that AAPL comes thru on 1/23 earnings. When you have a moment, any insights, corrections re my thinking,sugg would be appreciated.
    Thanks

  56. Burrben

    Phil / AAPL 10%
    Maybe I'm looking at this the wrong way, but:
    1) I have tons of margin avail in my account (using Port Margin)
    2) I don't mind owning 100 shares of AAPL at 420, for a cost of $42,000.  I don't really care what the put price get's up to.
    3) AAPL would have to drop over 15% from here, which could happen, but 500 has been a tough line…although earnings are coming.

  57. Pharmboy

    SGEN/Kust – I noted that at the beginning of last week.  We were there making the rounds with VCs…..so, in 4-6 yrs…..we can be bought again!

  58. Pharmboy

    From Gann360…..Ladies and Gents….start your engines.

  59. lflantheman

    Virtual MoMo trade BTO 5 this week's NFLX 105 calls for 2.23

  60. Pharmboy

    Correlation b'w Fed's balance sheet and S&P500 = 85%……yes….rsquared is almost 1!

  61. qcmike

    Phil
    Is the AAPL trade your one trade for 2013  ? or wait till tommorrow
    Thanks

  62. Pharmboy

    Trannies….break out?  From Gann360…..

  63. Pharmboy

    Ummm….go short.

  64. rperi

    Thanks Phil and yodi.  Sold the caller for $6.02, now $9.75.

  65. Phil

    AAPL/Wombat – How long have they said AAPL laptops will succumb to margin pressure?  There are dozens of laptop and notebook brands and all are cheaper than AAPL yet, at about 50% more, they not only ARE the leader but became the leader over the past few years.  There are over 2Bn phone users in the World and AAPL has no plans to sell more than 200M phones a year so what's wrong with making phones for top 10% users?  Of course, realistically, we know that AAPL in this country already is bought by top 50% and similar subsidies exist in Europe so the whole thing is really an Asia issue, where AAPL has very limited penetration (but still sold 3M IPhone 5s in China in one weekend).  And, of course, it's all about the apps: 

    AAPL/8800 – Well then you are just making a bet but what was the point of such a high $80 spread?  You sure don't sound so bullish that you would place only token protection on a do or die call…  I don't know what you paid but let's say it was more than the $9 you have left on the Feb $545s (with the $625s now pointless at $1.15).  The April $480/500 bull call spread is $10 and that's already 100% in the money so, rather than need a 10% gain to get your money back, up or flat works and up 10% makes you 100%, rather than just putting you in the money.  I know 300% is boring but I'd rather have a 2/3 chance of getting 100% (anything up or flat) than a maybe 20% chance of even getting my money back and needing $565 (up 13% from $500)  to make that same 100%.  But that's just my strange preferences – you seem to rationalize risk in a whole different way where you don't see the value.  That being the case, I won't even get into the fact that the April $480/500 bull call spread has a net delta of .09 so it would take a $50 drop in AAPL (10%) just to cost you $4.50 of your $10, whereas anything less than a 10% GAIN in AAPL will probably wipe out your long spread entirely.  So we force ourselves to be happy with 100% gains if AAPL has good earnings (or at least doesn't go down) while having the longer spreads should at least keep 1/2 our money alive and that lets us deal with the FACTS of earnings and THEN decide if we want to put more money over the next few months. 

    AAPL/Burr – I see nothing wrong with that.  As long as you REALLY want to own AAPL for the net strike – it's no problem but I was just outlining that the risk is pretty big and you're only getting paid what the risk is worth – as is anyone who has that kind of cash to lend.  

    Dow/Pharm – I hope so.  Meanwhile, it's at 13,500 now – making slow but steady progress as we consolidate.  

    AAPL/QC – Only because I have to go on TV tomorrow but I don't like it anywhere near as much as I liked BAC, which I considered as safe as any other play in the market to the point at which it was LESS risky than spreading the risk among potentially weaker stocks.   AAPL has no Government backing and isn't too big to fail – in fact, I had said when their market cap was over $600Bn that they were possibly too big to succeed (back in July issue of SWW and from that week's chat):

    AAPL ($604.97)  – I think the main reason AAPL is undervalued is simply that it's gotten so big ($600Bn), that there simply isn't enough capital flowing in this low-volume market to flow into AAPL and bring it up to $1Tn. Where would the $400Bn come from? Total market inflows have been negative so money has to flow out of other stocks ($40Tn) and into AAPL so the whole market would have to drop 1% to bring AAPL up to $1Tn and, since AAPL is tied up in various indexes with the rest of the market – that's not going to happen. So AAPL can only really rise with the Nas and the rest of the indexes now as the stock is too big to succeed essentially. That's not to say they can't pop 10% on earnings  – but sustaining it is another matter entirely.

    Down here at $500 – they are exciting again but, once they get back over $600 – I will be concerned again for the same reasons.  

    AKAM/Rperi – There, now don't you feel better?

  66. yodi

    rperi
    AKAM
    Seeing Phil's comments in deed the stk has had quite a ride. Starting at the beginning from 2011 at over 50 down to 20 and up to 40 again.
    Looking at my records I have traded in artificial calls and occasional puts during Dec 11 to Mar12 with a conservative 2 option play and cash in over 1520.00
    Even with holding a non div. paying stk you can make good money and sleep well at night without taking side job.
    Holding such a stk, the saying is you get paid to hold the stock. It does not matter where the stock goes you always can cash in with selling options. That is your pay.
    Lets look at this month position. Stk is 39.78. where is you income play? sell Feb. 40c for 2.22 return 5.5%. Not bad for a 32 day hold. In Feb you get called or if OTM you hold the stock to sell the next caller.
    So you check your position once or twice a month before expiration. I feel this is not a very swetty day job type.

  67. Gingbaum

    Phil, are you on tv today?

  68. stjeanluc

    That looks like an upside down list:

    http://www.bespokeinvest.com/thinkbig/2013/1/14/is-apple-the-old-facebook-and-facebook-the-new-apple.html

    Oh how the tides have shifted in Tech waters since the start of the fourth quarter.  Apple (AAPL) was once the most beloved stock on Wall Street (and probably the world), but it has been the most loathed since the start of the fourth quarter last year.  At the same time, Facebook (FB) was likely the most loathed stock on Wall Street following its disastrous IPO last year, but it has been one of the most loved since the start of the fourth quarter.

    I mean, FB, YHOO, SIRI, MU in the top 10!

  69. Pharmboy

    Yeah….this is gonna end well. Get to ATH…then BOOM!

    More than half of House Republicans are OK with a government default if President Obama won't accept their budget-cut demands, party officials tell Politico. Even more GOP lawmakers are willing to allow a government shutdown come March 27. Taking the shutdown route would help ensure "President Obama understands that we’re serious," says the House Republican Conference chair. "We always talk about whether or not we’re going to kick the can down the road. I think the mood is that we’ve come to the end of the road."  – here.

  70. rperi

    Much

  71. stjeanluc

    Too big / Phil – In some ways, AAPL is a victim of the law of big numbers. If you grow your earnings 20 or 30% a year, you soon reach a point where increasing them another 20 or 30% means some seriously big numbers! Last year they grew sales by 45% to $156B. To repeat that they need to find another $70B of sales in 2013. In then $101B in 2014. That's a tall order! The same with Income – they grew it by 60% to $41B. Can't make it 60% every year. 

    On the other hand, with a forward P/E of 8.75 (excluding cash) and looking at an average P/E of 15 over the last 5 years, there is room to run on the upside even without these huge growth numbers… 

    The same law of big numbers also applies to the US economy now and will apply to the Chinese one soon. Expecting 4% growth on a $16Tn economy means growing by $640B every year. That's a lot! And China will soon find out that growing a $7Tn economy by 7% also is a big lift…

  72. Phil

    Day job/Yodi – Nice work if you can get it. 

    TV/Ging – I'll be on BNN tomorrow around 3, which means I'll leave early at 1 tomorrow so hopefully not too much excitement.  

    Best and Worst/StJ – I love those lists.  This one is very strange.  Hadn't noticed MU or YHOO doing so well and how amazing that AAPL is at the bottom of the heap?  BBBY but not BBY?

    Reps/Pharm – They need more than that as the Dems will vote to extend and need just 17 Reps to join them as the GOP lead is just 234 to 201 – despite all the braggadocio, they are losing their House advantage as well.  

  73. stjeanluc

    Shutdown / Pharm – These guys are idiots with no understanding of the implications. Soon the credit worthiness of the US will be damaged for good because of these guys' antics, interest rates will go up and that increased cost will mean more cuts to keep the balance (or more taxes). And soon enough we'll have to cut into programs that are popular (or defense) so what will they do? Idiots….

  74. yodi

    rperi
    AKAM to come even you can just roll the caller to May 40 you step up your stk position from 30 to 40 you received 6.02 and now you will get another 3.80 = 9.82 even steven.

  75. stjeanluc

    That new Tesla SUV (to be release in 2014 I believed) looks pretty hot:

    Tesla Model X SUV handson video

    Gullwing doors…. Who needs a Lamborghini now.

  76. stjeanluc

    One reason NFLX is a tough short – they can announce a new deal and spike the stock price 1%!

    http://www.engadget.com/2013/01/14/netflix-lands-deal-for-turner-and-warner-bros-tv-series-beginni

    The company announced today that it's struck a multi-year deal with Turner Broadcasting and the Warner Bros. Television Group that will see a variety of animated and live-action series from the Cartoon Network, Warner Bros. Animation, Adult Swim and TNT be made available for streaming.

    Even if these contracts are expensive.

  77. yodi

    stjeanluc
    Telsa dont you think the electric doors will run your batteries down??? 8(

  78. Phil

  79. yodi

    Phil day job I am only sweating here if the AC does not work !!  

  80. wombatcreative

    StJ //
    I was just thinking the same thing. If I wouldn't have seen the title of the cart I would have assumed they were flipped. as well. We should simply go back to the 'dogs of the DOW'? Interesting experiment.
    Phil // not sure what you're referring to with me – the WSJ link ? 

    "AAPL/Wombat – How long have they said AAPL laptops will succumb to margin pressure?  There are dozens of laptop and notebook brands and all are cheaper than AAPL yet, at about 50% more, they not only ARE the leader but became the leader over the past few years.  
    I respectfully disagree. I think that people will always pay for quality, and AAPL has always been the epitome of well-designed top of the line design-centric product. They are ( in my line of work ) always held up as the apex of Brand management.

    This is even more-so in Asia. When I lived there it was the largest status symbol around ( mobile ) outside of having a car. If they can crack China deal – game over.
    I would think they would focus all their production efforts on mobile in the near future before FB screws it up.

    One thing that I think folks lose sight of is Apple operates and enforces, ruthlessly their 'ecosystem'. If you own an apple product, chances are you own multiple. I personally think the mini was a great idea. I remember every day coming home from work on the subways – ( Singapore ) – not exaggerating – every 3 out of 5 owned an iProduct and they were all playing games.

    China is hard to crack – it will happen becasue for the most part, Asians love to be told what to do -so the 'eco-sytem' mentality' fits nicely. The beauty is that the penetration is already there in terms of mobile ( upwards of 90% in most of APAC ).  Cooke needs to strike a deal with e power brokers
    Pharm // Did the republicans also mention that a shutdown would default on all our debts, shut down services, obliterate our TBills and make the trash our credit rating ?

  81. Phil

    Tesla looks great!  

    Rumors DELL is being bought.  HPQ up 6% to $17!  Our strike in the Income Portfolio is $15 for 50 short $5.65 puts to expire worthless ($28,250)!  By the way, I'm almost done with the update – way more work than I thought as I'm trying to extrapolate earnings for each one with very little hard evidence.  Next time, I wait until after they all report…

    /NQ futures up 10 now at 2,735 – tight stops if you are in those.  

    Qs back over $67 but AAPL still dragging ($503).  Weekly $520s just $2.  

    Large numbers/StJ – That's why we have to inflate the whole thing and make room.  

    AAPL/Wombat – Just commenting on your comment with discussion on "margin pressure".  

  82. Savi

    Phil--Thanks for all the guidance—got in on the weekly AAPL 500s and am out—a small profit, nevertheless a profit
    STJ--Tesla looks great—Phil how about a Tesla portfolio?—to buy one in 2014—

  83. stjeanluc

    Tesla / Yodi – I am guessing these doors will also work manually like a trunk door. And by 2014, they'll have better batteries anyway!

  84. stjeanluc

    Income Portfolio / Phil – Might better off just update each position after they report… I could add the earning date in a column in the spreadsheet.

  85. stjeanluc

    DELL / Phil – Quick, let's sell some Jan 15 puts!

  86. scottmi

    Oil – wow! who said what? 

  87. yodi

    stjeanluc
    Dell you gambling!!!

  88. kustomz

    How funny…
    Going private would carry with it some measure of embarrassment for Michael Dell. For years, he was held up as an entrepreneurial hero who forged the company from a college dorm room. During Dell’s glory days and Apple’s darkest hour, Michael Dell infamously suggested that Apple should go private and return the money to shareholders rather than trying to continue on as a going concern. Apple, of course, came up with the mother of all second acts with the iPod — and then a third and fourth with the iPhone and iPad, respectively.

    http://www.businessweek.com/articles/2013-01-14/is-michael-dell-finally-taking-his-company-private

  89. Opesbridge

    Phil/TZA – We currently have the Apr. 16/19 bcs bought for $1. Seems like a good time to buy back the $19's and use that $1.84 collected to roll the Apr $16's to the Jul $13's (as suggested in the Income Portfolio Update). Your thoughts? Thanks.

  90. gbase

    Hi Phil,
     
    I'm looking for a Tree Planting learning opportunity re: FTR.
     
    I have Jan13 7.5 Puts sold for 1.40 now 3.20 – against and near-full position in the stock.
     
    My question is do I:
     
    1) Accept assignment
     
    2) Buy it back at a loss
     
    3) Roll – if so, to what
     
    FWIW – I also sold calls against this position too – and they will expire worthless and I’ve been enjoying the dividend.
     
    I’m looking for guidance specific to this trade – and in general with regard to long-term buy-write management.  Thanks!

  91. BruceE

    Thanks for Nasdaq futures Phil.  I got out with plenty of mcmuffins.  How about oil, can that be shorted yet?  

  92. jophil

    Phil, what's your opinion on NYCB? Worth doing some options on it? thanks

  93. Phil

    You're welcome Savi.  Any profit's a good one.  

    TSLA/Savi – I don't know about buying one but you can pay yourself $600 a month to cover a lease by buying the 50 of the 2015 $30/42 bull call spread for $5 ($25,000) and selling 25 of the $23 puts for $5.30 ($13,250) for net $11,750 and then you can sell the 25 of the March $34 calls for $1.80 ($4,500) to cover your deposit and first few lease payments.  The upside at $42 is $60,000 – enough for a new Model-S but hopefully we can pay to lease one sooner than 2015.  Let's do this set in the Income Portfolio as it will be fun to track.

    Income Portfolio/StJ – It's actually a good exercise for me because it forces me to read up on a lot of sectors.  That's how I ended up getting more bullish – couldn't even find reasons to sell covers yet.  

    DELL/StJ – I doubt it's true.  Not a big fan anyway.  

    TZA/Opes – No buying back the $19s!  Why give them the money?  $19 is more than 50% away and that's' more than a 15% drop in the RUT, back to 750.  Better to take the .30 you are willing to spend and put it towards a roll of the April $16s (now .50) to the July $14s, now $1.35 so the cost of the roll, for now, is net $1.05 to buy $2 of position and 3 more months.  Once the $19s get to .10, then we can sell some April calls for .50ish (currently the $16s) and then it's pretty cheap insurance again.  In the Income Portfolio, we already had the $15s, so it's pretty much the same logic but $1 higher.  On the next big move up in the RUT, it might be a good idea to sell some puts too. 

    FTR/Gbase – This is a case in which you should consider just rolling your loss.  In this case it's $1.80 and so are the short 2015 $5 puts so you can roll to there and you have your stock (with the 9% dividend) and then you can sell some more calls and hope they hold $5, which is a lot easier than praying (also not a valid investing strategy) they jump over 50% to $7.  The simplest rule of thumb for managing these trades long-term is A) Sell Premium, B) Sell Premium and C) Sell Premium – if you keep those things in mind, you will be in good shape.  

    Futures/Bruce – You're welcome.  Oil can certainly be shorted at that $94 line (/CL) with tight stops over the line, of course.  The Dollar is smacked down to $79.50 so if it goes below that line – get out but, otherwise, I think we have a good chance of seeing a nice dip this week.  

    NYCB/Jophil – If they actually pay that 7.4% dividend ($1), then they are interesting.  It does look steady and they paid the last quarter out on Nov 8th.  Unfortunately, they have missed sales every quarter in 2012 and are projecting shrinkage in 2013 but, at $1.02 going forward, this thing is practically a REIT with the 100% payout.  The 2014 $13 puts are $1.30 so why bother owning the stock when that's 30% more than the Dividend if you sell them and you don't have to do anything with a .47 cushion this year.  I'd test drive them there as long as they hold the 200 dma ($13) and, if they get over $15, you can always sell the $15 calls for $1 (est) and buy the stock for $15 and you'd be in for net $13/12.85 and picking up another $1 in dividends except then you'd have a 10% cushion and a worst case of owning the stock for 5% less than it's trading for now.  Oh – or you can wait for earnings (1/29) and see if they miss for a better entry altogether. 

    Nas giving it all back already! 

  94. tommyt

    uso puts back to .82 to .83 i just reloaded

  95. 8800

    Phil,
    Thanks for the guidance and sugg re Apr 480/500. I see the 100% gain if AAPL at least holds 500 but don't see where the 300% comes in (below). I assume the choice of the Apr contract is to give extra time to recover from an earnings miss. I guess my binary thgts are that if AAPL shows good earnings on 1/23 the stk rockets, if not, it plummets. Just my neophyte's view that it won't be at 500 – either considerably above or below.To my (perhaps, distorted) way of thinking wouldn't the intrinsic underlying value of AAPL take more time to become manifest in the price of the stk (after 2 misses in a row) than Apr? I am in a few 500/650 '15 for that purpose, in that I feel at some point more accurate (higher) valuations of assets (cash and brand value) will set in. I do appreciate the extra (perhaps remedial) guidance.
    Thanks again
     
    AAPL/8800 – Well then you are just making a bet but what was the point of such a high $80 spread?  You sure don't sound so bullish that you would place only token protection on a do or die call…  I don't know what you paid but let's say it was more than the $9 you have left on the Feb $545s (with the $625s now pointless at $1.15).  The April $480/500 bull call spread is $10 and that's already 100% in the money so, rather than need a 10% gain to get your money back, up or flat works and up 10% makes you 100%, rather than just putting you in the money.  I know 300% is boring but I'd rather have a 2/3 chance of getting 100% (anything up or flat) than a maybe 20% chance of even getting my money back and needing $565 (up 13% from $500)  to make that same 100%.  But that's just my strange preferences – you seem to rationalize risk in a whole different way where you don't see the value.  That being the case, I won't even get into the fact that the April $480/500 bull call spread has a net delta of .09 so it would take a $50 drop in AAPL (10%) just to cost you $4.50 of your $10, whereas anything less than a 10% GAIN in AAPL will probably wipe out your long spread entirely.  So we force ourselves to be happy with 100% gains if AAPL has good earnings (or at least doesn't go down) while having the longer spreads should at least keep 1/2 our money alive and that lets us deal with the FACTS of earnings and THEN decide if we want to put more money over the next few months.

  96. dclark41

    Phil
    Would you double down again on USO FEB 34's or wait for inventories this week?

  97. Pharmboy

    483 on longer term charts is AAPL's line in the sand…..

  98. Phil

    USO Feb $34 puts back to .84 and that's a DD in both $25KPs (thanks Tommy). 

  99. Phil

    300%/8800 – That was a typo.  I meant 100%.  Yes, the Feb premium will almost entirely disappear on earnings, April should hold it a while as you can't be sure AAPL won't announce ahead of them.  

    USO/DC – As we still have a full month and we're on the end of the cycle, it's a good gamble for the week.   Same half out at $1 rule though,.

    Nice pop into the close – green on Dow, NYSE and Transports – VIX still not worried at 13.48 and Dow volume nothing at 105M.  

  100. rdn4evr

    OOh, LULU revised guidance after closing and is down 5+%

  101. rdn4evr

    However, it doesn't look like LULU reduced guidance much, so what gives?

  102. gbase

    Phil/FTR
    Thanks for the help with the FTR position.  So, more on long-term BW management.  I understand the concept of selling premium,  but once you've reached your full position on a particular stock – do you just stop selling puts and only sell calls or do you continue to sell puts and just manage them more closely.  Thanks again!

  103. Lincoln

    rdn4evr: lulu
    I think when pe is over 40 same store sales in single digit growth looks like an issue.  $.02  motley fool did  a video this weekend that may have caused a pop today but it looked like a high school class assignment.  you may want to contact the "fools" and offer your vastly superior analysis skills :)

  104. wombatcreative

    Phil //
    Have fun tomorrow.
    Taken from the TS article – these should be your opener //
     
    That's what the financial and tech media does these days. They're all largely cut-and-paste operations. One outlet "breaks news" and the mindless regurgitation begins. We give crappy reporting the opportunity to take on a life of its own and, quite possibly, move markets and impact perceptions.
    And that's exactly what it is — crappy reporting. 

  105. stjeanluc

    DELL / Yodi and Phil – Sorry, was just making fun here… Although is these rumors die down, the backlash might produce an entry point.

  106. Burrben

    StJean / Studies
    Since you have access to good analytical tools I was wondering if there would be a screen that we could setup to find options to sell, based upon some set of parameters?
    For example:
    High front month skew, or large spike in front month vol
    Strike prices that are > than 15% out of the money
    Open Interest > 100
    Price sold returns at least 10% on margin
    Ex Div date that may impact the price of stock
     
    I'm sure there are lots of other factors to consider, but maybe if we setup some of these automated scans that return candidates, it would be interesting to track.

  107. jfawcett

    GDX – Starting to build that position with 2 Jan 2015 Short Puts for $5.30 credit.  One filled at 0930, the other 3 hours later.  Open interest is weak for the 35 and 40 strike.  As with all my positions, I place a limit order above the ask to sell and just wait for the fill.

  108. Burrben

    Really good chart of VIX products
    VIX ETP Performance in 2012

  109. jfawcett

    Who would have though that the HPQ chart would look better than the AAPL chart. :)

  110. silentstorm44

     Would you believe This afternoon Merrill Lynch assigned only  one (1)  Jan. call  out of my 20 covered call position? sheeesh

  111. Phil

    Long-term/Gbase – Generally, no, you do stop selling puts when you have a full position and then you just sell calls for a regular income.  With FTR, for example, if you own the stock and get the basis down to a comfortable $3 you can, for example, sell the 2014 $4.50 calls for .40 and that, plus the .40 dividend is a 26% annual return on your investment – not much need to do anything else at that point, is there?  

    LULU – Yes, they are priced for extreme growth so good growth is a disappointment.  

    Good quote Wombat. 

    GDX/Jfaw – Nice job working into it.  

    LOL Jfaw.  Sad but true.  

    Assignment/Silent – That's annoying.  Sometimes they'll do that – lay an assignment off proportionately among everyone who has the position.  Better than randomly zapping a few people until they fill the whole amount, I guess…

  112. jfawcett

    Phil – AAPL trade of the year.  Can you come up with an alternative?  I would not make that investment.  Just too rich for my investing premise.  Thanks

  113. scottmi

    Recovery – or not. Stefan Molyneux's less than cheerful presentation with some sobering numbers. Lots of charts and numbers (many we've already seen on PSW). Interesting payroll numbers around the 25 minute mark. A very bearish outlook.

  114. stjeanluc

  115. stjeanluc

    I'll get back to you during the day Burrben!

  116. al54

    just would like to know how your neice and baby are doing

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