$76,103 – That's not sales, that's profit!
Every minute of every day, AAPL is making $76,103 (at $40Bn a year) on the sale of $316,120 worth of products. No company on Earth comes close to that kind of metric and, overall, the stock's performance clearly indicates that but, if you listen to the MSM, you would think AAPL is finished.
We had a nice, in-depth discussion about AAPL in Member Chat this morning and we not only concluded it's still a buy but we came up with a lovely spread that has the potential to turn $3,000 into $45,000 between now and Jan 2015 if AAPL simply holds $600 – needless to say we're very proud of that as it's always nice to have a trade or two in your portfolio that returns 1,500% and we rarely get a chance to do them with a blue-chip stock like AAPL.
Note in the above chart, that AAPL is still a relative outperformer this year – shown priced against HPQ, DELL, INTC, IBM, CAT and ISRG – all good companies that have simply failed to keep up. We also like HPQ at this level, now $14.30 as their REDUCED guidance has them earning $3.62 per share next year after earning $4.05 this year and that's still 25% back on your money, which sure beats TBills and we're not even counting the $18Bn in cash they have on hand, which is quite a lot when you consider that their entire market cap is now just $28Bn. Small wonder HPQ spent $9Bn buying back their own stock last year, when it was priced 100% higher.
HPQ is a pretty good candidate for a buy/write, where we Buy the stock for $14.30 and Write 2014 $15 puts and calls (sell short) for $5.50 and that nets $8.80 on the trade and, if HPQ is below $15 in Jan 2014, then another round of shares will be put to you at $15 for an average entry on 2x of $11.90, which is 17% below the current price and, if HPQ is over $15 in 16 months, then you get called away at $15 for a $6.20 profit on cash (75%). Buy/writes are our favorite tools for making long-term entries – see "How to Buy a Stock for a 15-20% Discount."
As we mentioned INTC in the above chart, let's look at a similar trade idea for them. INTC is nicely beaten-down at $22 but may go down to $17.50 before stabilizing so this is a bit early but we can buy the stock for $22 and sell the 2015 $20 calls for $3.70 and the $15 puts for $1.50 and that drops the net entry to $16.80, which is 23.6% off the current price and lower than we think it's likely to fall and we're only committing to buying another round at $15, and that's 32% off the current price, which would give us an average entry of $15.90 – worst case. If called away at $20, our gain is $3.20 of our net cash investment of $16.80 or 19% over 28 months – not a bad return for betting Intel simply doesn't fall more than 10% lower than it is now but nowhere near as exciting as HPQ because it's considered less risky and we're being more cautious as we don't think it's bottomed yet. INTC is also kind enough to pay you a .90 dividend while you wait – adding another 5.3% to your annual return! This is better than T-Bills folks…
Now, back to the markets. As we can see from our Big Chart, we're having a bit of a pullback, with the Nasdaq and Russell down 5% from the September highs and the other indices down roughly 2.5% so far.
The Nasdaq made a critical failure yesterday as it fell below it's 2.5% line AND it's 50 dma at 3,082 while the Russell is right on their 50 dma at 824 and in danger of failing their 2.5% line at 820 as well. The S&P is our most important indicator and it looks like they are right on that critical 5% line at 1,440 – our only index not to fail that level and that is all of our remaining hope so we'll be watching them VERY closely this week.
Should the S&P fail – then the Dow has no support down to 13,295 so they'll make a nice short but we're still hoping we won't have to pull the trigger on that one. Going into this dip, TZA was our primary hedge in the Income Portfolio and our April $15s have gained .40 since Friday (16%), well outpacing the 2.5% drop in the Russell for a nice offset.
Otherwise, we're still long-term bullish as nobody notified us that the Fed has withdrawn QE3 and it was just yesterday that China threw another $40Bn into the markets. What's bumming everyone out this week is worries about earnings (not so bad so far) and all these TERRIBLE pronouncements from the IMF's meeting in Tokyo this week on the state of the Global Economy. At PSW, we've been telling you the Global Economy sucks for months so it's not surprising to us but it seems to be shocking the sheeple – who are now running for the exits but, as noted on the Big Chart – certainly not at anything like an alarming pace so far.
In order to climb a wall of worry, we need to first recognize and accept those worries and what we have here is the beginnings of capitulation after a very long period of denial (where bad news was good news into the Fed). This is why we prefer to buy now with a 20% downside cushion – we're a little early to call it a bottom but the FACT of QE3 means we may not make too low of a trough on the way down so we're using this earnings season to do a little bargain hunting.
Tell us when something new happens that we should be worried about but, so far, China's slowdown we've been discussing all year, Europe's mess is 2-years and counting, California Cities in debt crisis also old news, Japan staggering under 220% debt is bad, but just 10% worse than 2 years ago and 7.8% US Unemployment is the best reading since Obama took office and the only thing we have to worry about there is whether or not Jack Welch's head will explode if we go down to 7.7% next month.
So far, earnings are coming in better than expected – we'll see how the week plays out but this correction may be shallow indeed if it turns out we've underestimated the recovery in the US and overestimated the impact of China and Europe slowing down.
The verizon store, no Apple store here, doesn't stock them, special order.
Thanks DC! Corrected.
AAPL/Angel – That's interesting but it's a one-month wait still so maybe that's why. AT&T won't even project when anything other than the 16Gig version will come. Don't forget, for most people now, it's an upgrade, not an initial sale so the sales are spread out over contract periods and more handled through Telco providers than at the AAPL store – that's the downside to having massive market saturation.
Russia/StJ – They charge us $50M per seat!
QQQ/Morx – You read my mind.
Good chart Rain.
COST/Snow – I love them and I usually hate those kind of places. They do a very good job.
YRCW/Scott – Been hanging around $6.50 to $7.50 since Sept. Very tough to play though.
AAPL/$25KP, DC – Thanks for catching that.
Not getting any real momentum going so far.
What is your opinion on edu?
SHADOW you need to get your i phone thru your service provider huh?
Supposed picture of AAPL guy with IPad mini:
Seems real because he's asking for directions as his map app must have gotten him lost…. This certainly looks real, note the mini dock connector:
EDU/Harip – That is one loco stock. We used to play them back in 2007 but it's very frustrating because they go up and down wildly on all sorts of news – it's essentially a slot machine… I would say they are worth $20 nd that big sell-off in July, to $9, was a good opportunity to get in but $16.50 is just not that exciting as they could go $4 either way or both for no apparent reason.
PHIL GREAT POINT ON MARKET SATURATION..I think china dependence is big mistake anyway…just look at japanese carmakers….plummeting…sales crashing just because of a stupid goat filled island…so on top of the chinese economy being a massive house of cards that will implode much more over the coming years….you have to worry about the govt reacting harshly to our govt actions…and their people shunning our products.
ONE OF MY FIRENDS just bought one A 64 GIG 2 days ago from at&t wireless over the phone…she said 14-21 days til shipment and that people were getting them much sooner than that
MY FRIEND FURTHER STATES : there are NO covers at the store either…which is annoying…the guy said the 3rd parties didn't have enough time to build them…yet you can order them online from numerous outlets…and the aluminum scratches much easier than prior versions…so you really need a case immediately
DIA puts – picked up some 134 puts when SPX broke 1440 this morning. gain paid for a bunch of QQQs. now a close trailing stop is on…
ZLCS – sure, small quantities.
Wow, high beta things are getting crushed. Fixed income also taking it across the board….nice.
Those $650 next week calls are now $8.10 with AAPL @ $641.16.
…but it sure looks like it wants to go higher.
China/Angel – Well, on the whole I wonder how many of the real population give a damn. I think the attacks on Japanese cars may be more posturing by Government forces than real sentiment although we had our own version of that in Detroit at one time so you never know.
64G/Angel – On-line, T has no listing and I went to the store by me and they said end of Oct this weekend so about 20 days but I said don't bother, I'll see what else is out for Xmas. As to scratches, the other phones are glass on both sides, only aluminum or whatever on sides. That's why people are freaking out about scratches – wasn't an issue before and still isn't on the front of the screen but people like to complain about things…
AMRN broke down….here we go…..
PHIL my friend still insisting he bot 64 gig on phone form att..odd huh?
AMRN – 1/2 out at 35c. Will put a stop on the rest at 10c trailing. I can't watch it today.
AMZN/AAPL – someone rolling out of AMZN and into AAPL?
Given the new taxes in place in France and the fact the rich are leaving France now – would it not be wise to short the French Banks? And if so, which one do you think is the best to short?
stjeanluc…….Her'es what to do with the virtual MoMo port. AAPL is the present MoMo, so put 10 January 620s there for 56.00
ebay starting daily deals now on services…see ya grpn wouldnt want to be ya
Don't forget that they suspended their dividend in July.
MoMo portfolio / lflan – OK. I guess we continue the portfolio for now!
Phil / AAPL: Your AAPL play looks interesting, but the numbers don't add up. Is this because I use Schwab? (1) Short $400 put: margin is $4000 ($12K for 3) PLUS value of put, so no immediate credit for sold put. (2) BCS is $5000. Therefore, net cost to account: $9000 per unit. And (3) selling naked weekly calls – against what? There is no long naked call to sell against. Should I change broker?
Gamble play/ AAPL weekly 645 at $3.50 (were above $6 a few hours ago) trying to get them for $3
Finally, bonds are wake up.
Checked out the Apple store here in SoCal inland empire on Saturday. Constant line of 30 to 50 people to get iphone5. Rest of store did not seem to have the usual Saturday crowd though. I have the 4s and probably will not upgrade until next year when 4g coverage is better.
bought AAPL 630/635 BCS for 3.55
AAPL/Angel – I'm sure it varies store to store locally. Also, I get the feeling if I were getting a new account instead of upgrading that they would do better but I could be wrong. As to aluminum, it's a shame about the scratches as I'd rather use it without a case.
AMZN/Scott – Looks that way for a change.
French banks/Ging – That's not a bad thought, can't be good macros for them. The big ones are BNP, Soc Gen and Credit Agricole but none of them are regularly traded in US.
Transports fell below 5,000 again. Although we could fall 100 points further (2%) – we generally get sharp moves up from this line.
SVU/RJ – Thanks, it was still listed on Yahoo at .35 but you're right, the dividend was suspended. Still I like companies that have the mindset to pay a dividend but are cheap because they took time off. Those kinds of stocks were huge winners back in the crash as dividends came back once the crisis was over.
AAPL/Kong – I have PM so I get it wrong sometimes but looks to me on TOS paper money that selling 3 2015 $400 puts is net $12,180 in margin and then, separately, you're buying the 3 bull call spread for $15,000 so $15,000 cash and net $12,000 in margin and, of course, the short puts count as a margin sale each week for naked shorting. If you have ANY kind of margin issues in your account – this is not a trade you should be within 100 miles of obviously as, like FAS Money, sometimes you may have to roll up to 2 or 4 short calls on a pop….
Bonds/Rhc – Just in time for the auction.
4G/TraderD – I have the new IPad with 4G LTE and hardly ever don't get a signal when I travel.
AAPL/Amit – That's a fun play.
The case against patents:
Iphone 5 scratches – seriously folks, It's a phone you'll replace in less than a year…..
Phil / iPad: I, too, have an iPad, had an iPhone [now Samsung], both still on AT&T, and I don't get an iPad 4G signal hardly ever, even when it sat next to either of the phones with a full strength signal. Antenna? I don't get it.
So Phil, Are we officially short these?
AAPL $25KP – 2 of the calls stopped out. Now we want to sell 2 next week $650 calls for no less than $8.50 if AAPL goes back below $640 to replace the $8.50 we just spent. That's also where we'll likely roll the remaining 4 if we break $650.
10:00 AM On the hour: Dow -0.3%. 10-yr -0.13%. Euro -0.02% vs. dollar. Crude +0.23% to $92.6. Gold -0.1% to $1763.25.
11:00 AM On the hour: Dow -0.33%. 10-yr -0.17%. Euro +0.12% vs. dollar. Crude +1.21% to $93.51. Gold +0.04% to $1765.65.
11:52 AM Europe closes on the lows with the Fed's Sept. 13 QE∞ announcement looking more and more like a key inflection point for Western equities. The Stoxx 50 is off 5.4% since its initial Pavlovian pop. Today: Stoxx 50 -0.7%, led by Spain -1%. The euro flat at $1.2866
12:00 PM On the hour: Dow -0.54%. 10-yr -0.07%. Euro +0.01% vs. dollar. Crude +0.39% to $92.75. Gold -0.14% to $1762.55.
1:00 PM On the hour: Dow -0.76%. 10-yr -0.01%. Euro +0.03% vs. dollar. Crude -0.5% to $91.93. Gold -0.12% to $1762.85.
1:04 PM The Treasury sells $21B in 10-year notes at 1.7%. Bid-to-cover ratio of 3.26, vs. recent average of 3.11; indirect bidders take 41.3%. Direct bidders take 22.9%
Three lunchtime reads:
1) Goldman on the reality of the jobs market
2) The new U.S. energy scene: how to play it from here
3) Why the housing crash is far from over
I like the 4s enough that I am not motivated to rush out to get the 5. I usually like to let some other sucker buy the first round on anything until it's clear the bugs are worked out, even if its an apple product.
Beige Book looking WAY better than last time. No excuse for not putting in a bottom here.
Phil/AAPL- those who forget the lessons of history are condemned to repeat them. I remember this forum before the frenetic activity changed into hourly trading of AAPL options, and those who dared to flip options over the short term were condemned as peasants who had no patience. Fortunately this reader took Phil's advice many moons ago:
Sold AAPL Jan 14 300 put for $18.50 now trading at $7.07
Sold AAPL Jan 14 380 put for $34.96 now trading at $17.02
Sold AAPL Jan 14 410 put for $35.65 now trading at $22.40
Phil, you are hiding your light under a bushel. And without wishing to offend, Lflan's approach can only work for himself – I do not believe it is reproducible by anyone else. Recommendations for flipping options on a daily time frame sails close to the wind of providing investment recommendations – something which I feel we should steer clear of on this forum.
A MUST WATCH:
7 Biggest Lies about the economy by Robert Reich:
I'm sure this goes for both sides but incredible how slander and libel laws don't apply to politics at all. I wonder if they did, would it keep them on their toes to be more honest.
can u recommend a play on natural gas
Patents/StJ – Have ground innovation to a halt.
IPad/ZZ – You don't get the LTE signal? I'm usually in NYC area, Florida, CA or Vegas but really could count the number of times I don't get a signal on one hand.
IPhone/Trader – More to the point, there is no way in Hell I would be motivated to break a contract just to get the upgrade and, as noted above, 40% of US Teens (and probably adults) already own an IPhone and probably 2/3 are still under contract so AAPL will get their replacement sales but over the course of the next 2 years. Once upon a time, people would consider this a great thing for future earnings but sentiment is so bearish on AAPL at the moment, there's no point in applying any long-term logic to them.
AAPL/Winston – Very nice, that's definitely the way to play them – without all the drama too. I think in the short-term, we have a unique opportunity to establish a position in AAPL that will be worth $40-50 per share on the 26th and of course it's a gamble – I have said as much many times and, when we were net even last week I reminded people who didn't have the stomach for it to get the hell out because it is painful and expensive to stick with this position but the adjustments we make are a good learning experience and that is the primary reason for the $25KP in the first place.
Reich/Rustle – I like his little videos.
Oil making a stand at PP? Not liking the beige book it seems!
Finally some sense in AMZN. S2 is about $245 and we are getting there. I also have a Fib line at $242 or so. And $240 seems like a decent line so we might settle around here.
AAPL traders…….look at the AAPL one day chart today, and look at the DOW chart. The DOW is steadily down and AAPL is in what I call a moderated wave. So today, right now, daytrading not likely to work for you. So, I traded it lots yesterday, none today. The setup is not favorable.
Okay. I miss read it. Thank you Phil