Is $700 More Than Just a Number for AAPL? (Pin Risk History and Analysis) 9.19.2012

[shareaholic app="share_buttons" id="24556347"]

   It is interesting to point out and remember that one man’s floor is another man’s panic point; this is essentially at the core of volume related technical studies.   The individual perception of what seems to be logical during panic, euphoria, or complacency all makes a market at a price. The question becomes how do we get to theses prices or large round numbers? Maybe a certain amount of rounding must be done… it is interesting to note that of 11 of the 15 biggest analysts on the street have large round numbers as price targets on AAPL (ie ending in a 0), but this is not breaking news…what is the trade on this and what may cause these large round numbers? The answer is pin risk in the derivatives market.     

As of the close on Tuesday (09/18/12) AAPL was trading at $701.95. Last year at this time, the same question could have been asked, for AAPL was a mere 1% away from a new all time high. Lone behold on that expiration Friday AAPL pinned right on $400 (see Sep. 2011 quote below). The following Monday AAPL made a new all time high…raging to $411.         

September is traditionally a slow month, so open interest can be powerful tool during this month. Hedgers and speculators square up their positions, for they do not know if they will be assigned or expire ITM. Open interest at the $400 line was roughly 30,000 on the calls and 21,000 on the puts. Exhibit 2 below visualizes the open interest of the September 2011 options on both sides.

In September of 2010 (exhibit 3) AAPL pins directly equidistant from the $270 and $280 strike. Then in 2009 AAPL pinned right on $185. And finally in 2008 AAPL went out at $140.91, not as strong as the other months, but still noteworthy.

E-mail the author with any comments or inquiry…

Data courtesy of Thinkorswim

Morning Rage 9.19.2012

[shareaholic app="share_buttons" id="24556347"]

Gold and copper futures are up around five points to 1776.60 and one one-hundredth of a point at 3.7990 respectively. Silver, platinum and palladium are down slightly. Crude oil futures are down less than a point to 94.43. The USD has gained $0.11 cents on the Yen after the Bank of Japan’s announcement overnight.

Apple (AAPL | 701.91) tipped over the $700 mark yesterday after teasing with the resistance point on Monday. The explosiveness of the stock has slowed slightly at its current level, gaining only $2.13 yesterday and losing almost a point overnight and in pre-market trading. There has been nothing but praises for the new iPhone 5, pointing the stock towards continued strength as it has made another new all-time high.

Google (GOOG| 718.28) exploded yesterday, up another $8.30 and continued growth overnight gaining about a dollar to 719.00. Google is nowhere near its all-time high of $741, but it is at a 52-week high and continues to break through this level. Mozilla, the builders of the Firefox web browser, plans to compete with Google in the mobile operating area and is currently working with ZTE Corp to implement the software in their phones.

Ascena Retail Group Inc. (ASNA| 21.01) released a positive earnings report this morning, the stock is down a point and a half overnight.

Housing starts report comes out today at 8:30am EST. Housing starts are registrations of new construction generally in residential buildings. Existing home sales report will follow two hours later.

Alex Kalish has a master’s degree in economics from Suffolk U.

Questions, comments and suggestions welcome:

Options can reduce your risk. Want to know more?

Screen Shot 2012-09-12 at 11.09.46 AM (CRM) Conference Moves Stock 9.18.2012

[shareaholic app="share_buttons" id="24556347"]

Aside from the headliners, CRM is expected to launch a wealth of products onto to cloud community. CRM may update their Dropbox type application, similar to GOOG’s Drive. Chatterbox users can save and access files form any linked device, basically it is a collaboration tool for the enterprise. is also expected to be launched. “Work” will be a more human resources centric application based upon contact management needs. According to reports, this CRM tool will remember information about a contact, anything from Twitter handles to e-mail.

With all these cool services it is hard to stay impartial and only focus on the material items. Since 2006, below is an aggregation of past returns of CRM during the Dreamforce conference.  The figures were calculated buying the open of the first date and selling the close of the closing conference date.

 The conference starts today and ends Friday the 21st, and with that in mind the September options seem to be pricing in a mediocre move.  Considering the close on Monday CRM was $158.17/share and the ATM $160 straddle was selling for $5.68 or 3.6% of the stock. Since 2006 there was only one conference that had a move of that kind of magnitude.  The 2010 conference may have caused CRM to surge 3.13%; or did it? The SPY in that time period rallied 0.9% and then beta adjusting CRM for that market move…CRM actually outperformed the market, assuming a 1.4 beta. It can be argued that the outperformance was due to the conference.

According to CRM’s CEO Benioff, “We are not trying to snuff competitors out.” Even thought they seem to be doing a good job of that, for the market is assigning CRM a lofty multiple of 100X TTM. Considering the former, short interest, as last reported on 9/01/12, was about 10% of the CRM float.  The analyst community also sees blue skies head for the cloud provider…33 of the 40 analysts that cover the stock have buy or better on it. The average target for CRM is $170. 

 Screen shot 2012-09-18 at 7.13.21 AM

E-mail the author with any comments or questions

Data courtesy of Thinkorswim

Trade of the Day (RIG) 9.17.2012

[shareaholic app="share_buttons" id="24556347"]
Market Quotes_Equity_Trading

Trade: Selling the $RIG oct 46-45 Put Spread for $.50

Risk: $50 per 1 lot

Reward: $50 per 1 lot

Notes: Paper sold 3500 RIG Oct 46 Puts for $1.70

UPDATE 9.21.2012  With a Nice Rally higher after Paper sold the Oct 46 Puts, these Put Spread are now worth $.28, almost good for a double.

FedEx Earnings 9.17.2012

[shareaholic app="share_buttons" id="24556347"]

Despite having lowered its forecast, however, the majority of analysts are still confident in the company, with 16 of 22 maintaining a buy rating on the stock. The company has a market capitalization of $28.48 billion, and is currently trading around $90.02 per share. So far this year, the stock is up 7.72 percent.

Ultimately, expect a tough reaction to disappointing earnings tomorrow. Going forward, the company needs to figure out how to reduce costs and improve efficiencies under the current uncertain global economic environment. The company remains fundamentally strong, but it has issues it needs to address, and expect that to reflected in the stock price the remainder of this week.

Brandon Kieltyka is currently an undergraduate studying Finance at Daytona State College.

Twitter: @kieltyka05