Put Options Lotto on Apple: Request for Technical Analysis Opinions
January 9th, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
When Apple (AAPL) was up around $200 recently, I scoffed, chortled and thought, “How f*!@#$% ridiculous that this thing is $200.” I brought up the chart and laughed some more.
Almost in disbelief that anyone would be buying AAPL at $200, I logged into my brokerage account and swiftly bought January put options with a strike of 140. I paid .11. They closed at .50 today.
I didn’t have the capital to take the pig short properly, or the stones to buy more expensive strikes (closer to the money). But look what happened:
Daddy likes rotten AAPLes
It’s the old extreme stochastic oscillator—price/volume divergence trick.
Anyway, we’re ten days from expiration and I’m wondering if any Cryptogon technicians are playing this pig short? My puts have virtually no chance of being in the money, but that’s not the issue.
Looking at January expiration, would Cryptogon technicians sell those 140 strike puts here, or let it ride a bit longer?
Personally, letting them expire worthless would be less painful than watching them double or more after taking .50 here. But, you know what they say about a bird in the hand… And what happens to pigs.
Yep, eating soup with a knife. Neither easy, nor pretty.
FWIW: from your chart, it looks like the price is at a support level; I wouldn’t be surprised (I haven’t checked) to find that it’s also at a Fibonacci retracement level. Since your options are still pretty far out of the money, you’ll lose time value if it goes sideways for a while, even if the price of the stock does begin, eventually, to descend again. Take the bird in the hand.
I assume you factored in the current macworld expo rumors. I’ve been watching AAPL for the last decade and have observed (often in frustration) that it invariably loses several pct immediately following any expected announcement (and regains it shortly thereafter). of course as you’ve undoubtedly noticed, AAPL also seems to have aquired quite a few new traders over the last year, many of whom are probably taking short positions.
I agree with anothernut. I’ve been playing appl long for several weeks now, selling my calls at the exact same point you bought your puts. I hate going short on a stock that is trending so strongly, so I’m staying on the long side for now. If you look at the weekly chart and start the trend in July of ’06 it runs right under the current price. (depending on exactly how you draw the line of course.) My guess is that we’ll see a jump up off this price, which would give you another opportunity to ride it down.
Apple’s got an energy of its own right now and what the stock is actually worth seems to be pretty meaningless. Buyers are going to flood back in at some point soon here in my opinion. Also, macworld expo is next week accompanied by the introduction of a brand-new shiny toy for the masses–the price always seems to rise off these events.
Of course, I won’t go near calls until the RSI turns up.
Yep, the clock is definitely not my friend here. Sideways, up or going down too slow, I lose (profit). The only reason I’ve held on this far was because the economic news is so grim out there right now.
I checked the daily chart again and noticed that its also sitting right on its 100 day ema. Its been riding it since August of ’06 and unless you have some reason to believe its done, I wouldn’t bet against it.
@ scrod
“I assume you factored in the current macworld expo rumors.”
I never look at rumors, balance sheets, company news… Unless I’m trying to get a euphoric feeling from all the noise and confusion. I like the squiggly lines and chicken entrails much better.
@ farmerellis
Having said I don’t pay attention to company news, HA HA, I’d love to see some really negative hype/press on Apple as a setup for Feb calls. Nothing like sheep overshooting on bad news with weeklies intact. That’s the kind of “news” that’s useful to me… If it gets to herd to zig so I can zag.
I dread the bounce, dead cat or otherwise that almost certainly brewing.
AAPL: true support @ 162.50. small bounce from 170.2 must not exceed 184.50 else stock will attempt double top @ 202.96. so, i would cover your puts on break of 184.50, then reshort (rebuy the puts) at 202.9
indu trigger for covering the puts would be 13000.
hope this helps,
cybele
Out @ .56.
Watch it tank now that I’m out. 😉
Bird in the hand. Nobody ever went broke taking profit. Pigs get slaughtered.
@dagobaz, I also drew my support down there. If I had actually shorted the shares, I would have held, but the clock was ticking, ticking, ticking on those puts.
Thanks for the input, guys.
So, where’s the next one?! HAHAH
The previous 2 days’ lows were almost to the penny at the 61.8% Fib retracement level (about 170.47 on my chart) of the last major move (starting Nov 12 2007, ending 12/27/2007) and as I write this, the price is 171.46. Again, I think you did the right thing getting out.
It closed up $8.15 today to $179.40. Those 140 strike puts were cut in half.
If I had held on, it would have given new meaning to, “Pigs get slaughtered.”
My friend who is a retired pharmacologist at the SF General hospital, and is wealthy from his family. Interestingly, he’s a communist who defends Stalin when pressed, wears thrift store clothes, and he spends his morning day trading to raise funds for Oxfam. Recently I asked him what he’s doing, and he had a very similar perspective to you here – had shorted Apple and was going to cover Friday. He likes a elliott wave/fibonacci astrological forecasting site, and they have been saying that this year has a pattern like 1947. They were recommending first shorting department stores (good advice), and then IT companies after that. S&P should reach 1300-1350 then will rerally. Also, mid July should be some trough or turmoil peak. Then he has a pessimistic outlook for yr2009-2011. http://www.sandspring.com/graphs06/1947-2007analoga.pdf