4 ms·

AAPL closes at exactly $500.00

41 points by barredo 14y ago

barredo 14y ago
More: http://seekingalpha.com/article/1002601-buy-apple-on-january-18 http://seekingalpha.com/article/1002601-buy-apple-on-january... > But now, however, the gains of the Summer have come back in and Apple's share price has only to stay flat for the next two months for all those call options to expire worthless. The institutional money managers that wrote those options, if they were to try to manipulate Apple's share price, have a lot of incentive to keep Apple in place for a short time, then drive it higher: > Apple is getting a lot of buzz for being undervalued here, but there is an enormous amount of pressure on the price at these levels that will be lifted after options expiration. If you like Apple, consider having some patience here and making a buy at the end of the day on Friday, January 18th, 2013.
- dizzysoul 14y ago
  Wow. Maybe it's naive for me to ask, but is this even legal?
  - dj_axl 14y ago
    > is this even legal? At least this is a stock, not a commodity like ahem oil.
  - btian 14y ago
    Absolutely. If someone else (preferably rich) thinks that $500 doesn't justify true value of Apple, he could buy in the market, and good luck to short-sellers to borrow so many to sell. My guess is that it's just some insider selling, and it's coincidental that it closed at $500 on option expiry date. Otherwise it would be hard to explain how it ended at $486 on Wednesday.
    - kjackson2012 14y ago
      It's not legal. It's price manipulation. However, the SEC doesn't care, because it's very hard to prove.
      - travisp 14y ago
        If you're sure the price is being manipulated low or high in the short term, then you have a very easy money making opportunity.
- ajaymehta 14y ago
  Fairly tempted to put in an order for some AAPL now...
  - btian 14y ago
    Wait till earnings announcement. Could be a disappointment.
    - ajaymehta 14y ago
      Thanks. But do you think it'll gap up on Tuesday when markets open?
      - btian 14y ago
        I don't know. Earning conference call happens at 5pm EST, after the market closes. Just saying that if you're an investor as opposed to a short-term trader, there isn't that much difference between 500 and 550 if it's going up to 1000, and there isn't much difference between 500 and 450 if it's going down to 200. Of course many people will disagree but hindsight is always going to be 20/20, and many people like to pretend that they know something.
        ajaymehta 14y ago
        Right -- good call. Thanks for the advice.
    - confluence 14y ago
      The way both of you are talking about trading this stock indicates that you both aren't qualified to trade. But then again - there aren't any tests to pass before one can trade - so trade away. But remember - you both look like dancing pigeons to professional traders (http://rationalwiki.org/wiki/Skinner_box http://rationalwiki.org/wiki/Skinner_box).
      - btian 14y ago
        I already own 10 shares of AAPL way before it went up to 500/700. Not selling anyway. Just saying... I'm not a trader in any way or form.
- incision 14y ago
  Keep in mind that anyone can put up an "article" on SeekingAlpha, it's all user-generated. Bleacher Report for finance.
  - wiredfool 14y ago
    Like anything, 90% of it is crap, but there are a few good articles there. Just don't try to contest dividend growth investing, since they tar and feather people who don't believe in it.
confluence 14y ago
This is on Hacker News why? Daily stock market quotes are like comments or articles on gossip blogs - it's the opinion of ~0.001% of the market for ~1 second - and the opinion that they give is usually wrong.
- drchiu 14y ago
  I think unless you've played with options, you won't have a clue why a close like $500 is a big deal. This basically causes all calls/puts option contracts on either side to be worthless. It is commonly accepted "fact" (note the quotations) that stock prices are manipulated to some degree on options expiration days to minimize losses of contract writers, who could typically be traders from hedge funds or from some investment bank.
  - deleted 14y ago
    [deleted]
  - keithwinstein 14y ago
    I don't quite follow. Exchange-traded options are American-style options -- they can be exercised any day until the expiration date. Somebody who owns a call option @ $500 can exercise it profitably as long as the bid goes above $500 at any point before it expires. Why is the closing price on the last day so important?
    - confluence 14y ago
      Margin. It's always about margin.
    - wiredfool 14y ago
      Because the option is almost always worth more to sell than to excercise, since the price of the option is the intrinsic value + the time value. The time value goes to zero as the expiration gets closer, where the intrinsic value depends on the price. E.g., if you took an at the money (just at 0 intrinsic value) option for a year out, the price might be 20% of the strike price. That 20% will slowly fade over the course of the year. (Or possibly go up, if the volitility of the stock goes way up). If, in 6 months, your stock was in the money a bit, the option would still be worth more than the intrinsic value. (though, dividends can mess with that, and some people excercise options early to catch dividends)
kjackson2012 14y ago
This was expected, since the price of stocks tends to get "pinned" to expiring options, which expired today. I was talking to one of my friends about AAPL being pinned at $500 yesterday. The closest strike price for options expiring today, with the highest open interest, was the 500 strike price. If I remember correctly, there were 30k+ contracts at this price. On Thursday night, those options were priced at around $4.95, or $495 per contract. There was a great deal of incentive for market makers to pin the price of AAPL at $500, rendering all those options worthless. Looks like it worked.
- mercuryrising 14y ago
  Can you more generally explain what your comment means? Here's my stab (way off I'm sure): So some people have options of Apple's stock. They have to buy 100 shares for every option (contract) they have. The options make interest from when they were offered, and they have to make a decision (strike price) when a certain stock price is reached (is this determined by the company offering the stocks?). As Apple's stock was more expensive at the time than the options, there wasn't an advantage is taking up the options?
  - thingylab 14y ago
    Wow wow wow. This whole "prices are pinned around a strike" story does not make any sense. First, a quick search on bloomberg reveals that stocks belonging to the S&P 500 (with liquid options) do not tend to close at exactly the most liquid option strike price on expiry dates, so a close at 500.00 is not "expected" for AAPL, or any other stock, today. Second, if you'd take 30 seconds to look up what an option is, you'd discover that option can be either calls or puts (options to buy or sell, respectively) so when the spot (market) price of AAPL is 495 at expiry, the 500 call is worthless, but not the 500 put is not. Third, the market for options is not the only one responsible for the spot price, if only because a lot of people actually trade AAPL stocks independently of AAPL options. Finally, most people who trade options do not give a damn about the spot price, instead they care about the (implied) volatility. Roughly, it means your profit/loss on an option position is largely immune to the moves in the underlying stock price (just look at people hedging variance swaps).
incision 14y ago
1) Of course stock prices suffer manipulation. 2) The braying about banker manipulation is necessarily louder here because AAPL is beyond popular with retail investors. Look at just about any charting/analysis site, it has been the most popular symbol on most days for years.
frugalmail 14y ago
The marketing is sure working on the lemmings.
apaprocki 14y ago
This is all tracked very well over at http://aaplpain.com/?page_id=8 http://aaplpain.com/?page_id=8 for those interested in the options market around AAPL.
thingylab 14y ago
I got seriously pissed because a bunch of idiots got excited about the number 500 and Apple, so this will probably be my last comment on this thread. Anyway, let me tell you this: I work for a (fairly) big 'global macro' hedge fund. Historically we traded fx and rates, but we started (slowly) trading equity last year. The rationale given to our investors was: "the equity market is full of arbitrage opportunities because it is very much a retail market and people tend to trade out of 'gut feelings'. We are not manipulating the market. You are, and we are profiting from it. Suckers.

41 points by barredo 14y ago

More: http://seekingalpha.com/article/1002601-buy-apple-on-january-18 http://seekingalpha.com/article/1002601-buy-apple-on-january... > But now, however, the gains of the Summer have come back in and Apple's share price has only to stay flat for the next two months for all those call options to expire worthless. The institutional money managers that wrote those options, if they were to try to manipulate Apple's share price, have a lot of incentive to keep Apple in place for a short time, then drive it higher: > Apple is getting a lot of buzz for being undervalued here, but there is an enormous amount of pressure on the price at these levels that will be lifted after options expiration. If you like Apple, consider having some patience here and making a buy at the end of the day on Friday, January 18th, 2013.

dizzysoul 14y ago
Wow. Maybe it's naive for me to ask, but is this even legal?
- dj_axl 14y ago
  > is this even legal? At least this is a stock, not a commodity like ahem oil.
- btian 14y ago
  Absolutely. If someone else (preferably rich) thinks that $500 doesn't justify true value of Apple, he could buy in the market, and good luck to short-sellers to borrow so many to sell. My guess is that it's just some insider selling, and it's coincidental that it closed at $500 on option expiry date. Otherwise it would be hard to explain how it ended at $486 on Wednesday.
  - kjackson2012 14y ago
    It's not legal. It's price manipulation. However, the SEC doesn't care, because it's very hard to prove.
    - travisp 14y ago
      If you're sure the price is being manipulated low or high in the short term, then you have a very easy money making opportunity.
ajaymehta 14y ago
Fairly tempted to put in an order for some AAPL now...
- btian 14y ago
  Wait till earnings announcement. Could be a disappointment.
  - ajaymehta 14y ago
    Thanks. But do you think it'll gap up on Tuesday when markets open?
    - btian 14y ago
      I don't know. Earning conference call happens at 5pm EST, after the market closes. Just saying that if you're an investor as opposed to a short-term trader, there isn't that much difference between 500 and 550 if it's going up to 1000, and there isn't much difference between 500 and 450 if it's going down to 200. Of course many people will disagree but hindsight is always going to be 20/20, and many people like to pretend that they know something.
      - ajaymehta 14y ago
        Right -- good call. Thanks for the advice.
  - confluence 14y ago
    The way both of you are talking about trading this stock indicates that you both aren't qualified to trade. But then again - there aren't any tests to pass before one can trade - so trade away. But remember - you both look like dancing pigeons to professional traders (http://rationalwiki.org/wiki/Skinner_box http://rationalwiki.org/wiki/Skinner_box).
    - btian 14y ago
      I already own 10 shares of AAPL way before it went up to 500/700. Not selling anyway. Just saying... I'm not a trader in any way or form.
incision 14y ago
Keep in mind that anyone can put up an "article" on SeekingAlpha, it's all user-generated. Bleacher Report for finance.
- wiredfool 14y ago
  Like anything, 90% of it is crap, but there are a few good articles there. Just don't try to contest dividend growth investing, since they tar and feather people who don't believe in it.

confluence 14y ago

This is on Hacker News why? Daily stock market quotes are like comments or articles on gossip blogs - it's the opinion of ~0.001% of the market for ~1 second - and the opinion that they give is usually wrong.

drchiu 14y ago
I think unless you've played with options, you won't have a clue why a close like $500 is a big deal. This basically causes all calls/puts option contracts on either side to be worthless. It is commonly accepted "fact" (note the quotations) that stock prices are manipulated to some degree on options expiration days to minimize losses of contract writers, who could typically be traders from hedge funds or from some investment bank.
- deleted 14y ago
  [deleted]
- keithwinstein 14y ago
  I don't quite follow. Exchange-traded options are American-style options -- they can be exercised any day until the expiration date. Somebody who owns a call option @ $500 can exercise it profitably as long as the bid goes above $500 at any point before it expires. Why is the closing price on the last day so important?
  - confluence 14y ago
    Margin. It's always about margin.
  - wiredfool 14y ago
    Because the option is almost always worth more to sell than to excercise, since the price of the option is the intrinsic value + the time value. The time value goes to zero as the expiration gets closer, where the intrinsic value depends on the price. E.g., if you took an at the money (just at 0 intrinsic value) option for a year out, the price might be 20% of the strike price. That 20% will slowly fade over the course of the year. (Or possibly go up, if the volitility of the stock goes way up). If, in 6 months, your stock was in the money a bit, the option would still be worth more than the intrinsic value. (though, dividends can mess with that, and some people excercise options early to catch dividends)

kjackson2012 14y ago

This was expected, since the price of stocks tends to get "pinned" to expiring options, which expired today. I was talking to one of my friends about AAPL being pinned at $500 yesterday. The closest strike price for options expiring today, with the highest open interest, was the 500 strike price. If I remember correctly, there were 30k+ contracts at this price. On Thursday night, those options were priced at around $4.95, or $495 per contract. There was a great deal of incentive for market makers to pin the price of AAPL at $500, rendering all those options worthless. Looks like it worked.

mercuryrising 14y ago
Can you more generally explain what your comment means? Here's my stab (way off I'm sure): So some people have options of Apple's stock. They have to buy 100 shares for every option (contract) they have. The options make interest from when they were offered, and they have to make a decision (strike price) when a certain stock price is reached (is this determined by the company offering the stocks?). As Apple's stock was more expensive at the time than the options, there wasn't an advantage is taking up the options?
- thingylab 14y ago
  Wow wow wow. This whole "prices are pinned around a strike" story does not make any sense. First, a quick search on bloomberg reveals that stocks belonging to the S&P 500 (with liquid options) do not tend to close at exactly the most liquid option strike price on expiry dates, so a close at 500.00 is not "expected" for AAPL, or any other stock, today. Second, if you'd take 30 seconds to look up what an option is, you'd discover that option can be either calls or puts (options to buy or sell, respectively) so when the spot (market) price of AAPL is 495 at expiry, the 500 call is worthless, but not the 500 put is not. Third, the market for options is not the only one responsible for the spot price, if only because a lot of people actually trade AAPL stocks independently of AAPL options. Finally, most people who trade options do not give a damn about the spot price, instead they care about the (implied) volatility. Roughly, it means your profit/loss on an option position is largely immune to the moves in the underlying stock price (just look at people hedging variance swaps).

incision 14y ago

1) Of course stock prices suffer manipulation. 2) The braying about banker manipulation is necessarily louder here because AAPL is beyond popular with retail investors. Look at just about any charting/analysis site, it has been the most popular symbol on most days for years.

frugalmail 14y ago

The marketing is sure working on the lemmings.

apaprocki 14y ago

This is all tracked very well over at http://aaplpain.com/?page_id=8 http://aaplpain.com/?page_id=8 for those interested in the options market around AAPL.

thingylab 14y ago

I got seriously pissed because a bunch of idiots got excited about the number 500 and Apple, so this will probably be my last comment on this thread. Anyway, let me tell you this: I work for a (fairly) big 'global macro' hedge fund. Historically we traded fx and rates, but we started (slowly) trading equity last year. The rationale given to our investors was: "the equity market is full of arbitrage opportunities because it is very much a retail market and people tend to trade out of 'gut feelings'. We are not manipulating the market. You are, and we are profiting from it. Suckers.