Apple (AAPL) and Google (GOOG) Pivot Points for 10.23.2012
Tag: GOOG
AAPL and iPad Mini Update (AAPL, QQQ) 10.22.2012
The tech giant has been on a slide as of late, more specifically since hitting $700. Shares are off nearly $100 from the all time high. It can be hard not to get emotional considering the massive amount of money the average individual investor has allocated to AAPL.
According to a recent study done by SigFig, “Nearly 17% of all individual investors own Apple shares.” And according to the same data, AAPL has three times the level of ownership of another widely held stock, GOOG. Interestingly enough, of the AAPL investors’ sample set, they on average have 17% of their portfolio allocated to AAPL. This is confirmed with other data, nearly 60% of the float is owned by investment managers and the top 50 investors in AAPL actually own about 43% of the company. To that point, nearly 15% of the AAPL float is allocated to index funds. And finally, the largest shareholder is Fidelity Management according to recent data. This is all very important, for it is vital to know the nature of the selling and buying done everyday, along with the corresponding personality of investors.
The AAPL analyst community already has high expectations for the device; for example Piper Jaffray expects AAPL to capture 50% of the 7in market upon release. On the other side of the analyst community, KGI Securities analysts Ming-Chi Kuo expects the cost breakdown to be around $195 for the 16 GB wi-fi version and at the higher end up to $254.50 for the 64GB, LTE + Wi-Fi edition, then perhaps one can add into that figure the typical 40% AAPL margins they so thoroughly enjoy.
The market leading iPad 3 is 9.7 inches; some analysts and AAPL followers are expecting a 7.85 inch liquid crystal display (LCD). These dimensions are slightly different than the prevailing 7-inch norm. The heaviest competition is expected to come from the ANZN Kindle Fire and the GOOG Nexus 7; both of which have fresh models out on the market already. The new 7” Kindle Fire is priced at $159.00. At this price point AMZN is expected to just break even considering the cost breakdown, but everything after that, including items like books and movies, is what AMZN is really in the tablet business for. AAPL is expected to naturally price at the higher end of the market.
AAPL is currently pinned between the 100 and 150 day moving average. The average price target is about $789 and for the upcoming earnings on Thursday the current quarter’s estimate is about $8.92. Of the 39 analysts who cover the stock, 97% of them rate Apple either a “strong buy” or “buy.”
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S&P Emini & Unusual Options Activity Daily Vid Recap 10.19.2012
Apple (AAPL) and Google (GOOG) Pivot Points for 10.22.2012
Apple (AAPL) and Google (GOOG) Pivot Points for 10.19.2012
Don’t Google for Profits, Just Read This: Pregame GOOG Earnings From Every Angle (GOOG, GOOSY, SPY, QQQ) 10.18.2012
The first graphic is a daily bar chart of price’s reaction to the past nine earnings announcements from GOOG. Action after the event is mixed; in most of the sample set, six of the nine observations, GOOG gapped and pinned on expiration (red vertical line). In the other observations, GOOG gapped, but then filled or reversed into said gap. This is indicative of efficient markets and random walk…for each observation is unique and independent of past price action. The gap is price’s way of adjusting to new news. While this gap may seem inefficient, the derivatives market, in most cases, was expecting said move.
Now to what is implied for the coming event, because the GOOG October options only have two days until expiration, they will be an organic way to derive what is implied for the event today after the close. Using the KOTM implied volatility & time based model, we calculated the one-sigma move (68% probability within) to be roughly $44.17 up/down or about 68% chance we settle between $799.67 and $711.31 by the close on Friday. The two sigma move (95% probability within) is $88.35 either way or $843.85 & $667.13. On Wednesday, October 17th 2012, the stock had a 1.5% pop while the market was only up 0.5%…1% alpha (we will touch on GOOSY alpha options later). The implied volatility curve (IV being a measure of risk, supply and demand, relative price, and an input into theoretical models) is displayed below, for it is important to know, especially if one is trading two different months in a spread.
The following chart includes the one and two sigma rolling probability cone, volume profile, and major moving averages (50, 100, 150, & 200). While the chart may seem noisy, it sure does tell us a lot if you listen! GOOG broke out of its June-July range on 7/5/12 and has yet to seriously look back. The recent pullback tested the trend line and 23.6% Fibonacci retracement level. Other than little support levels like prior lows, the next serious support level is the 50-day moving average at $710. On expiration Friday the 50-day will sit at the lower end of the two-sigma rolling probability level. The rolling probability levels and the KOTM probability levels differ for inputs like IV were not the same. The rolling used a lower IV, an average of the whole IV curve, which says there is a 2.5% chance we test the 50-day by expiration Friday (nearest red vertical line) vs the KOTM probability of 16% we test the 50-day by expiration Friday. The KOTM model is only used for the next two days, for it would not be appropriate to input 80% IV over the long term, as this one is only used before an earnings announcement. Additionally, we are currently sitting at the point of control on the upper, yet small, distribution. The other moving averages sit about 15% below us.
The ATM (at the money) front month $755 straddle (lifting the offer) is at about $39.50 (5.2% of stock). Because deltas move to one faster near expiration, it is easy to calculate break evens on the straddle; $715.75 & $794.25… IV crush, large gamma, and time decay. It is vital to note that given the ATM straddle, it is estimated that GOOG will need to expire one standard deviation away from where we are now, or move + or – $44, either way, just to make about 10% on the trade (using the KOTM sigma model).
IV is actually cheap however, historically speaking, given the average is 102% and Wednesday closed at 79%. The average % move and net change are about 7% & $40 respectively…see excel sheet for all data. Considering GOOG’s price, the ATM straddle will cost about $4,000. This is where the GOOSY will come in handy, while this is not a pure GOOG play, (see link below for alpha options explanation), it does lower the relative cost. The $88 ATM GOOSY straddle is about $4.10, about 4.6% of that product, and only $410 per one lot!
Alpha options explained here LINK
http://www.keeneonthemarket.com/blog/1562-goog-aapl-spy-alpha-option-review-avspy-a-goosy-10172012
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Data courtesy of Thinkorswim
Apple (AAPL) and Google (GOOG) Pivot Points for 10.18.2012
GOOG & AAPL v SPY Alpha Options Review (AVSPY & GOOSY) 10.17.2012
The index is simply a function of the absolute difference between the performance of AAPL and SPY. On 10/12/12/ the SPY closed down 0.34% while AAPL closed up 0.26%. So calculating the outperformance of AAPL would be adding SPY’s 0.34% to AAPL’s 0.26%, thus coming up with AVSPY’s close of up 0.60%. One could think of this product as long AAPL and short SPY, but not having to worry about weights, the proper amount of compensating shares, or borrowing costs.
Nearly any financial media outlet will have guests on touting this market as very unique, for it’s been a ‘stock pickers’ market…as if there is a market where you don’t have to pick the holdings in your portfolio. These managers try to beat market returns with their unique strategy and insight into companies. They attempt to pick excellent management with positive industry trends for example. The unfortunate part of this is that after all the fees and headache, most funds have returns just like an index fund. NASDAQ OMX alpha options are a convenient way to track and trade this performance, if one was really inclined to invest in management vs the S&P 500. This is just one way to view this product; another could just simply be hedging an individual long with a short index. This could especially be valuable, for the market has been known to trade on news from individual companies with large business scope and market clout… like GOOG & AAPL; both of which have alpha options.
The AVSPY also only has one implied volatility (IV) traders need to worry about, for if speculators wanted to play this otherwise in a pair trade, there would be two different contracts with different IV profiles. Considering AAPL earnings are only about seven trading days away, this product will be an interesting variable to look at when constructing a trade.
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Apple (AAPL) and Google (GOOG) Pivot Points for 10.17.2012
Apple (AAPL) and Google (GOOG) Pivot Points for 10.16.2012
