• Court ruling stated that Apple’s iPhone infringes on three patents held by MobileMedia (jointly owned by Sony, Nokia, and MPEG LA)

• Survey from Piper Jaffray shows that 53.3% of consumers plan on purchasing an iPhone 5 within the near future

• Intel’s new Corei7 processors likely to be installed in Apple’s iMac lineup starting in 2013 and is a highly anticipated addition

• Apple Files new patent for an intelligent call waiting system, that automatically places incoming calls on hold, when user is on the other line and can translate voicemail into text message

As you may recall in September of 2012, ratings firm Egan-Jones slashed the U.S. bond rating to AA- following the announcement of QE3. With Federal Reserve stimulus now more than double what it was in September, we should be on the lookout for another possible downgrade to U.S. treasury bonds in 2013 as the US debt-GDP ratio continues to widen. Looking to Europe, the ECB will most likely be forced to ease as well to push the EURUSD lower or face a currency devaluation that would be insufferable. Going forward, the Fed said it plans on continuing this “stimulation” until the unemployment rate falls below 6.5% and inflation projections remain no more than half a percentage point above 2% two years out. The empirical relationship between unemployment and the S&P 500, coupled with the possibility of going over the fiscal cliff increasing with every day, we could very well see a retracement in the S&P to 750.

PXD has been in a horizontal range since the better part of September. Earnings hasn’t even moved the stock out of its barcode-type pattern. If nothing is going to move this stock, one might as well play along with the trend. The upside to this range has been $110 and the downside, again, has been $101. There are many potential ways to trade this range.

One could simply flip long and short equity deltas around, selling the top and buying the bottom, but trading the stock ties up a lot of cash. Another way one could trade this range could be from getting long theta. This would put the probabilities into the favor of the option seller, for it is estimated that nearly 80% of all options expire ‘out of the money.”

Selling an iron condor would be a way to play this range. The short strikes could be around the aforementioned price levels. One could wait until the stock is equidistant from the two levels or leg into the trade, however being net short vega may not be a good idea going into the fiscal cliff. These support levels will get thrown out of the window if Washington does not get their act together.

A little fundamental analysis never killed anyone. PXD is an oil and gas E&P (exploration and production) firm. They are vertically integrated, meaning they enjoy cost savings from overlapping operating efficiencies These include, but are not limited to service equipment and people. Citi recently initiated coverage with a ‘buy’ rating and issued a $120 price target. The $120 level is vey significant, for it represents the all time high in the stock. PXD is 17% away from the all time high. PXD’s 100-day moving average recently crossed over the 200-day moving average too. This horizontal action may be setting up PXD for its next big move, up or down, but until then, one may employ a plethora of strategies to take advantage of the choppy action.

Feel free to e-mail any comments, feedback, suggestions, or general inquiries to…

Author: salernoma@mx.lakeforest.edu

One can thus scan for average ranges outside the one-sigma range. This strategy is looking a gamma scalps or just straddle swings; depending on if traders want to lock in short term profits. The edge here is from statistics. This scan yielded many stocks, but some stocks of note included DE, XOM, TBT, X, SNDK, UNP, IBM, FMCN, NVDA, PCS and AAPL. So according to the rationale outlined above, because these stocks have been experiencing average ranges outside one standard deviation (over the last 21 (Fibonacci) periods) long volatility and long gamma trades could be suggested. There are many ways to estimate the implied move with options. Expected moves can be estimated by taking the event’s ATM (at the money) straddle and multiplying it by 0.85 to estimate 50% probability ranges, ATM times 1.25 for one sigma probability, and finally ATM straddle times 2.50 for the two sigma probability ranges. It also may not hurt to be long Vega going into the political incompetence event known as the ‘fiscal cliff.’

Feel free to e-mail any comments, feedback, suggestions, or general inquiries to… Author salernoma@mx.lakeforest.edu

• Movies are now available through iTunes in select countries located in Europe, Africa, Middle East, Asia Pacific, Latin America, and the Caribbean

• According to a source from The Wall St Journal, Apple has been testing “a few designs” for an HDTV, with Japanese electronics company Sharp