A few rumors and news seemed to be hitting Apple (AAPL) stock yesterday and today. Let us have a look at them.
Tim Cook In China Rumors
One of the rumors held that since Tim Cook was in China, he would announce a deal with Chinese mobile carrier China Mobile (CHL) regarding distribution of the iPhone.
Another one held that he was there to solve the iPad imbroglio that's impeding iPad distribution in the country due to naming rights.
The way I see it, none of these rumors will pan out. Instead Tim Cook had meetings with politicians and suppliers, mostly on IP rights and worker rights, but nothing came out of it regarding the two issues above. Since there was some buying because of the supposed deal with the mobile carrier, the disappointment can have some negative short term market impact.
The New iPad Not Selling Too Well
Another rumor, this one more likely to hit the share price, is due to the supposedly rather lukewarm sales of the new iPad after the initial record-setting burst. This comes both from the availability of iPad stock in many retailers, instead of the expected "out of stock" situations which usually happen at launch, as well as from a Chinese website claiming that Apple reduced its production schedule for the new iPad.
Audit of working conditions at Foxconn found serious noncompliances
In this case it's not a rumor; the Fair Labor Association (FLA) has actually released a report on the working conditions at Apple's Foxconn assembler, detailing the noncompliances, namely regarding working hours, which on average were 60 hours/week, well beyond the 49 hour legal limit. This might entail a slightly higher cost for Apple over the long run.
Wild speculation in Apple's options
Perhaps more telling of the speculative interest Apple's rally has generated: lately the front month options for Apple have been trading in massive numbers. Indeed, the options have even exceeded the trading in the stock itself at times, which probably means the tail is wagging the dog. For instance, yesterday these were the reported volumes: 208292 calls and 177435 puts, corresponding to 20.8 million shares on the calls and 17.7 million shares on the puts, which compares to around 21 million shares traded on the cash market.
Conclusion
Given the rumors swirling around Apple, some raising unfounded expectations, others putting into question the sales of the new iPad, together with the wild speculation implicit on the options trading, it would seem that Apple stock is vulnerable to some short term wild swings leading to a possible short term correction.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
