Trading Apple Going Into The iPhone 4S Release Date

| About: Apple Inc. (AAPL)
Apple (NASDAQ:AAPL) has been through a number of iPhone announcement and release cycles which have produced significant positive alpha compared to the S&P 500 ETF (NYSEARCA:SPY). I chose not to use the Nasdaq ETF (NASDAQ:QQQ) due to the massive AAPL weighting that it holds. If you just want the data, I have compiled it on a spreadsheet that you can download from my site by clicking here.

As shown in my previous article, Apple’s stock price has followed a general pattern around the announcement of its iPhone products. Please reference my previous article for the full methodology on the analysis. As well, you can view my most recent article explaining the key strategy behind the AAPL announcement by clicking here.

Put briefly, I analyzed AAPL’s alpha in order to see if there were any general alpha trends related to AAPL’s announcement date, both 10 trading days before as well as 10 trading days after. To be blunt, with the most current announcement, we are not anywhere close to the previous trends. The chart below shows the difference between an index of the previous announcements compared to the current announcement.

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The second and considerably more messy chart looks at each of the individual announcements compared to the current announcement. The dashed blue line is an equal weighted index of all the previous announcements, while the orange line is the announcement of the iPhone 3GS, another Apple fan-boy dream killer.

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Now I realize that it is not quite fair to compare the current stock price movements with previous, mainly because of the passing of Mr. Steve Jobs. As well, we saw an unusual run up in AAPL before the announcement, which quickly reversed.

In the same any case, this article focuses on where we are in comparison to the average release date alphas. We are still T-minus negative six trading days (at the time I am writing this article) until release date which, according to the index, is the optimal time to enter to capture the positive alpha. Here is a chart that compares the average announcement alpha versus the average release alpha.

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AAPL Index Alphas: Announcement vs. Release

Finally, the last chart shows the different product release alphas, once again with the index as a dashed line and the iPhone 3GS release in bold.

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AAPL Individual Release Alpha vs Current


I’m going to leave the conclusions more open to comments, but I did want to make a few points:

  • Release date alphas are markedly lower than announcement alphas, while volatility is significantly less.
  • The current announcement alpha decline is looking eerily like the iPhone 3GS announcement. Once again, other non-announcement/release issues may be seriously affecting current price levels. However, it seems like the market may not be priced correctly.
  • In all cases other than the original iPhone release, after day T-Plus four, alphas were generally positive. In other words, buy on Monday, October 10, 2011.
  • If you are looking to play the release date, we are currently sitting at T-Minus five, which would suggest getting in today (Friday, October 07, 2011) and getting out the day after release.
I am currently a little strapped for time, so what did I miss? Feel free to leave comments or help flesh out anything else I may have missed.

Disclosure: I am long AAPL.

Additional disclosure: Short SPY.