Apple: Knock, knock, knockin’ on $500’s door

As Apple approached $500 (at one point getting as close as $499.47) the options market went a little nuts.

Brelow: A snapshot of Apple options trading at Friday's close, calls to the left, puts to the right. Prices in blue were "in the money":

apple knockin' 500 door

Click to enlarge. 

My take: That 2,840% increase for the Aug. 21 CALL @ $490 was nothing to sneeze at. Chasing gains like that has caused many a gambler to lose the whole pot.

For a backgrounder on what happens when a stock approaches a strike price like $500, friend-of-the-blog John Konopka recommends Investopedia's entry on Max Pain.

See also: Apple at $497.48: Look who’s NOT underwater now

18 Comments

  1. Romeo A Esparrago Jr said:
    “… the options market went a little nuts.”

    Sometimes you feel like a nut.
    Sometimes you don’t.
    -Peter Paul Almond Joy & Mounds

    5
    August 22, 2020
  2. David Emery said:
    Actually, credit goes to John Konopka for the link to Max Pain.

    2
    August 22, 2020
  3. Doug Montgomery said:
    Joseph, I think you’re thinking of Travis Lewis and the Poorman’s Algo.

    1
    August 22, 2020
  4. Michael Goldfeder said:
    We should find out this week how many of the Short’s that were outstanding (26.502 Million as of July 31, 2020) have covered during this run up toward $500.00.

    I also saw an interesting piece of news on Friday that the White House had reached out to Apple and a few other tech names privately regarding the issue of the WeChat ban. These companies were told that any ban would not reach or in any way impact their operations in China, or business being transacted in that country. It’s essentially limited to downloading that App (WeChat) here in the US only. Hence, no impact on iPhone 5G sales in China as were being speculated prematurely by many talking heads and purported analysts.

    Perhaps that WeChat news was a main driver of the stock surge on Friday. Especially in the last 45 minutes of trading. In addition to folks wanting to make certain that they are listed as a holder of the stock at the close of business on Monday in order to be a recipient of the 4 for 1 stock split. Clearinghouse transactions and the time lag in getting those orders processed and reflected on their books.

    0
    August 22, 2020
    • Jerry Doyle said:
      @Michael Goldfeder: I have written comments on PED’s blog that the president’s EO lacks jurisdiction over Apple having WeChat app on iPhones manufactured in China and sold in China. As far as Chinese nationals visiting the US thereby allowing the CCP a mechanism for keeping tabs on Chinese citizens enjoying the benefits of a free society, the president EO has no jurisdiction. The EO concerned the capturing of the personal and proprietary information of American citizens, not Chinese nationals or visiting Chinese nationals to America. I am perplexed as to why tech companies with their sophisticated legal teams would not already have sought definitive resolution on this issue and waited for a call from a White House staffer informing them that the EO ban would not reach or in any way impact company operations in China, or commerce in China.

      1
      August 22, 2020
  5. Paul Brindze said:
    Since some of us had questions about he timing mechanics of the split, I looked at the Apple Investor relations FAQ’s, and found this:

    “ What happens if I buy or sell shares on or after the Record Date and before the Ex Date?
    If you sell shares on or after the Record Date (August 24, 2020) but before the Ex Date (August 31, 2020) you will be selling them at the pre-split price. At the time of the sale, you will surrender your pre-split shares and will no longer be entitled to the split shares. Following the split, the new owner of the shares will be entitled to the additional shares resulting from the stock split.

    If you buy shares on or after the Record Date but before the Ex Date, you will purchase the shares at the pre-split price and will receive (or your brokerage account will be credited with) the shares purchased. Following the split, you will receive (or your brokerage account will be credited with) the additional shares resulting from the stock split.”

    My read .. the 24th does not matter for practical terms.

    1
    August 22, 2020
    • Gregg Thurman said:
      An investor is not the owner of record until after the settlement. The settlement has recently been reduced from 72 hours to 48 hours (weekends and holidays not included).

      Because of this I expecting Friday’s volume and prints to decline. I dot not expect them to increase.

      When it became apparent AAPL was not going to decline, but continue upward (dramatically so) I took a flyer on AUG $480/$485 Call Spreads on Friday. That trade offset the loss I took on Wednesday with my purchase of AUG 21 $465/$470 Call Spreads I Closed the same day I purchased them.

      0
      August 23, 2020
  6. Michael Goldfeder said:
    @Jerry Doyle: I agree with your comment regarding the legal departments at Apple and various other high tech companies regarding the EO. However, they cannot come out publicly and refute what some of these fear mongering analysts post that impacts the stock in a negative fashion. I’m referring to an article by Ming-Chi Kuo who does a decent job with many of his predictions regarding various Apple innovations and projecting the timing of these events.

    However, immediately after this EO was proffered, he came out and stated that this would be devastating to Apple’s iPhone sales in China as the entire country uses WeChat for most of their everyday transactions; subway rides, ride sharing services, beverages, etc.

    IIRC, his prediction was that it would cost Apple more than 35% of their projected sales if not more. That roiled the stock once that tidbit was published. Now that the news services published what everyone actually knew all along, that snippet of drama has been removed from the marketplace.

    0
    August 22, 2020
  7. Michael Goldfeder said:
    @Paul Brindze: Thanks for the post regarding the Record Date and Ex date for the 4 for 1 split. My hunch is that people want to get locked in as record holders on Monday August 24, 2020. While we all understand that Apple stock remains the same at $500.00 or $125 after the split, everyone reacts psychologically to the increased number of shares in their portfolio. Splits are more than mere window dressing.

    The talking heads are very resentful of the stock price increase and refuse to acknowledge the obvious FOMO reality being presented by Apple. I watched CNBC after the bell Friday, and several of them acknowledged that right now both Apple and Tesla are on positive trajectory’s that none of them want to be in the way of until the split shares begin trading.

    My gut tells me once the split shares begin trading, the momentum will continue with all of the Robinhood crowd stepping in and grabbing whole shares, as opposed to owning fractional shares. Again, the psychology of a split taking hold.

    0
    August 22, 2020
    • Jerry Doyle said:
      @Michael Goldfeder: “… My gut tells me once the split shares begin trading, the momentum will continue with all of the Robinhood crowd stepping in and grabbing whole shares, as opposed to owning fractional shares. Again, the psychology of a split taking hold.”

      I believe you may be “on-to-something” even though Apple already is widely held. During this COVID-19 quarantined Season(s) there appears to be (especially on RH) a frenzied active trading behavior of which I believe Apple shares will participate, similar to Tesla most likely will enjoy, too.

      0
      August 22, 2020

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