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The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.
I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.
I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.
Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.
The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.
I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.
I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.
"Later this year, we've got the best product pipeline that I've seen in my 25 years at Apple"
Conclusion
The risk in AAPL shares is elevated right now -- this week, the immediate-term. We will see soon if AAPL delivers, over-delivers or under-delivers on its new found promise of innovation, a pipeline better than any in the last 25-years and a corporate identity outside of Steve Jobs.
As the title indicates, AAPL has finally done something that the market has digested as innovative in the post Steve Jobs era. An new identity is forming, finally. The stock has seen a huge rise (a gain in market cap larger than the market cap of 450 out of 500 of S&P companies).
The news today: Tim Cook is speaking... right now at WWDC.
The Charts Tab (two-years) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink). Provided by Livevol
We can see the huge run-up since AAPL hit its annual low of $379.67. The stock is up 66% in less than a year. That rise is equivalent to ~$210 billion in market cap, which alone would make the ~14th largest company in the world (approximately the size of Proctor & Gamble).
But, the real talk of the town isn't that rise, but rather, the last month. Check out the stock chart since the day of the earnings release on 4-23-2014. Provided by Livevol
That 21% rise is basically the size of Boeing (BA). But now that the rise has happened, we are left with risk. Risk that AAPL will actually deliver. Risk that the rumors will turn into facts. Risk that AAPL is actually innovating. With a $65B rise in the last month in company value, the equity market has placed its probability on "yes." The option market reflects the increased risk, even as the stock rises.
Let's turn to the IV30™ chart in isolation, below. Provided by Livevol
The implied volatility is the forward looking risk in the equity price as reflected by the option market (IV30™ looks forward exactly 30 calendar days). Check out that rise of late. The old axiom "volatility rises as stocks drop and volatility drops as stocks rise" is simply a banal and casual observation driven by supply and demand factors. I detail that below in a link.
For now, the risk is that AAPL delivers (or under delivers or over delivers). And we can see explicitly the risk in the conference right now in the skew.
The Skew Tab snap (below) illustrates the vols by strike by month. Provided by Livevol
Check it out -- the red curve represents the Jun 6 weekly options, while the green curve represents the Jun monthly options. Two clear phenomena:
1. Both expiries show parabolic skew, which in English means the option market reflects both upside and downside tail risk
2. The red curve is above the green curve, which in English means that the option market reflects mor risk in the immediate-term (this week) than in the next three-weeks. That immediate risk is WWDC. In fact, it's right now as Tim Cook speaks.
Finally, the Options Tab is included below. Provided by Livevol
Here we go. The option market reflects a price range of [$614, $646] for AAPL by the end of trading this week.
If you believe the stock will be outside that range on expiry or any date before then, then you think the volatility is too low.
If you believe that range is too wide, and that the stock will definitively be in that range on expiration, then you think volatility is too high.
If you're not sure, and can make an argument for either case, then you think volatility is priced just about right.
Let's see if AAPL delivers, over delivers or under delivers on its new found promise.
Here's some news from right now:
---
"Later this year, we've got the best product pipeline that I've seen in my 25 years at Apple," Eddy Cue, Apple's senior vice president of internet software and service, said last week at the Code Conference . "I believe the products we've got coming are great."
Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.
The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.
I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.
I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.
Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.
The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.
I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.
I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.
Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.
The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.
I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.
I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.
It's all about jobs this week.. well, that and the European Central bank (more on that below). Wednesday and especially Thursday & Friday may present market moving macro news. The data and positioning last week in the bull vs. bear camp were whiplash worthy. New all-time highs in the S&P 500 were reached yet the average volume in May was the lowest since April 2013. But then again, 2013 was a huge bull run, so in a certain sense, who cares?
GDP shrank in Q1, making it nearly impossible for the FED to reach its 3% growth rate goal for full year 2014. If not for the spending in healthcare due to ACA, Q1 GDP shrinkage was downright scary. But again, no one seemed to care... winters happen, laws happen, right?
The labor market participation rate is shrinking faster than ever before, making the unemployment rate 'artificially' low. But that's OK, baby-boomers are retiring, we know that, so of course participation is lower... right?
S&P 500 vs S&P to Russell 2000 Correlation (30-wk moving average)
Wages... Well, about 20% of the jobs lost in the last recession were from low paying jobs, yet 40% of new jobs created are in low wage sectors. That could be considered bad, but then again, nobody seems to care about that either. That is, if we consider "nobody" the stock market.
MOMOs rallied again, biotechs rallied again, but earnings were down. Winters happen.
The expectations for May are pretty big -- if those are not met, I don't think the winter argument will keep the market up. But, if, and it's a distinct possibility, the rebound in May is larger than expected, hey, that winter argument does hold water, and we will see new highs in the S&P 500 -- that's a promise. A promise based on an "if."
Further: "Investors are closely watching Europe this week, but it's not President Obama's European trip that is getting the most attention. The market is transfixed on what the European Central Bank (ECB) will decide at its policy-making meeting this Thursday, and that could be very dramatic."
Source: ECB rate cuts likely to have little impact on Europe's economy: Mark Dow
The ECB is expected to announce some dramatic Quantitative Easing (QE) of their own. But, the bar has been set so low for the slow moving and austere ECB, that "dramatic" could be relatively small compared to the US. Interestingly, as the ECB will likely announce QE, the US is ending QE. Hmm....
Having said all of that, how does an 11% VIX level sound? No risk here...?
All data and images for this report are provided by Charles Schwab optionsXpress
Economic Calendar
Partial List of Noteworthy Earnings This Week
The 15 most optionable earnings events; a relatively quiet week.
Technical / Pattern Breakouts to Watch: Up-trends
Note that five of the six names are repeats from last week (two of which are still China large cap ETFs). The Chinese ETFs outperformed the S&P 500 last week again.
Bubble, new bull market, or randomness?
S&P 500: +0.61%
--- FXI: +1.94% XPP: +3.51%
Technical / Pattern Breakouts to Watch: Down-trends
Note MOMO favorites LNKD (repeat from last weak) and SKUL.
Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.
The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.
I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.
I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.
