Wednesday, January 23, 2013

AAPL - "Just the Facts Ma'am" -- Well, that Supports the Opinion: "Everything has Changed. The Old AAPL is No More."

AAPL is trading $509.81, up 1.0% with IV30™ up 0.4%. The LIVEVOL® Pro Summary is below.



Apple Inc. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.

For those that don't know, AAPL is releasing earinngs today AMC.

I last wrote about AAPL on 12-10-2012. You can read that rather controversial post here:

AAPL - Everything has Changed. The Old AAPL is No More. The New AAPL is a Riskier Entity and the Market Doesn't Know What that Means Yet.

For the record, I have included the Symbol Summary from that article below for reference to the one above (from today).

We can see AAPL is ~$20 lower and the vol is ~8% higher. While I'll share my opinion on AAPL at the end, for now, it's "just the facts ma'am," and the facts are compelling enough.

Let's start with the six-month Charts Tab below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side we can see that AAPL is trading near a six-month low if not for a small recent rally into the earnings announcement today.

On the vol side we can see that the implied has been rising into the event, but in sort of empirical yet circumstantial evidence of my prior hypothesis that AAPL is in fact a totally different entity than it was a year ago (or whatever), we can see the implied is trading higher than the last eight earnings announcements. Note the blue "E" icon on the stock chart indicating earnings.

Last eight earnings announcements (IV30™):
Today: 42.27%
12-25-2012: 36.79%
7-24-212: 34.99%
4-24-2012: 40.43%
1-24-2012: 32.35%
10-18-2011: 37.58%
7-18-2011: 32.06%
4-20-2011: 27.51%

So, in English, the options are reflecting greater risk now into this earnings announcement than in the prior two years (eight earnings reports). Again, circumstantial evidence of my hypothesis.

I could show you the Skew Tab, but you already know what it looks like. Crazy vol in the weekly options expiring on Friday, and a monotonic decrease as we go further out in the option expiries. OK, you twisted my arm (or I twisted my own arm?), here's the Skew Tab:

Bottom, line the facts are this:
1. AAPL is near six-month lows

2. The IV30™ for this earnings release is higher than it has been for the prior eight releases.

And now for opinion... In the words of Austin Powers, "Allow myself to introduce myself." In my opinion, AAPL is a completely different entity than it was prior to Mr. Jobs' passing. I think AAPL is MSFT -- not yet, but soon... A company with disruptive technology unafraid to use less than the most ethical approaches to dominate markets, but this is America, and there are competitors, and eventually, someone else has the boy (or girl) genius with the next big ideas. Gates is done breaking the barriers of new ideas and technology. Jobs is too (absolutely all due respect). Remember when MSFT had a market cap of $600 billion?

The option market is reflecting greater risk into this earnings release than all the ones before (All = last eight quarters) b/c people are staring to catch on. There's more uncertainty, it's scientifically observable (i.e. a phenomenon). There's no telling what happens on this earnings release, the stock could rally hard, but IMHO, eventually we will all see:

"Everything has Changed. The Old AAPL is No More. The New AAPL is a Riskier Entity and the Market Doesn't Know What that Means Yet."

The vol numbers reflect that possibility.

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