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  • Apple: The Most Undervalued Equity in Techdom [View article]
    That shows his dad is making lots of jam selling Blackberries for his bread and butter.
    May 29, 2011. 11:02 PM | 1 Like Like |Link to Comment
  • Apple: The Most Undervalued Equity in Techdom [View article]
    You can create your own dividend by buying in-the-money LEAPS and then selling covered calls and/or puts against your position. For example buy the January '13 $265 LEAP call for $100 and sell the June $345 call for $3 to get a return of 3% per month, or if the stock is called away, then sell your LEAP, buy the stock and hand it over for a profit of about 11% for the (partial) month (or roll it over to a higher strike the next month).

    Alternatively you could also use options to buy synthetic stock--buy a call and sell a put--which would cost you almost nothing and given you the up- or down-side of the Apple stock without tying up much cash, which you could then invest in something that does pay a nice dividend, like ATT or Verizon, which are selling the iPhones.

    Or, if you are really, really bullish on Apple, why not sell the Jan '13 $400 strike put for $90 and use the proceeds to buy 3 $400 strike Jan '13 calls at $30 each. That way if the stock goes over $400 you are on a double free ride and the cost of admission is zero. Stock hits $500 and you have made $200 per share for no outlay.

    Or you could just sell covered calls against the stock.

    When life gives you apples, make cider.
    May 29, 2011. 10:15 PM | 2 Likes Like |Link to Comment
  • Apple: The Most Undervalued Equity in Techdom [View article]
    "My dinner was brought... In the first course, there was a shoulder of mutton cut into an equilateral triangle, a piece of beef into a rhomboid, and a pudding into a cycloid... The servants cut our bread into cones, cylinders, parallelograms, and several other mathematical figures."

    [Gulliver's Travels]
    May 29, 2011. 09:40 AM | 1 Like Like |Link to Comment
  • Using Apple Weekly Options if You're Bullish or Bearish [View article]
    $340 may have been the Max Pain figure for AAPL this week, but there were a pretty large number of $335 calls, but relatively few lower calls, so nearly all the open calls expired worthless. As I recall there weren't nearly so many open puts higher than $335, so even if $335 was not Max Pain, it was still extremely achey-breaky for all out of the money, at the money, and slightly in the money call holders.
    May 22, 2011. 10:46 PM | 1 Like Like |Link to Comment
  • Digging Deeper: Options Expert Discusses Pinning, Max Pain and Apple (Part Two) [View article]
    OK,here is something interesting. Goldman Sachs today issued a note advising their clients to sell Intel which recently announced a breakthrough in new chip technology. It is fairly unusual for brokerages to give a stock a sell rating.

    seekingalpha.com/artic...

    Now, INTC opened at $23.88 this morning, and there is MASSIVE open interest in the June $24 strike calls (60,000 contracts--much more than any other open contract on this stock). If Goldman is right in its "prediction" and Intel tanks, then all those option contracts will expire worthless, which would be great for whomever is short those contracts.

    It would be really interesting to find out who is short those contracts and who is long those contracts and how they feel about Goldman issuing this sell advice.

    The cynical part of me says that Goldman must be short those $24 calls, but it would refresh my faith in human nature if it was shown not to be so.
    May 19, 2011. 02:12 PM | 1 Like Like |Link to Comment
  • Digging Deeper: Options Expert Discusses Pinning, Max Pain and Apple (Part Two) [View article]
    Interesting, though, to note that Meyer Lansky introduced a stunning innovation--the idea that it was more profitable to run honest games with a built-in mathematical margin of profit than to run bent games, a lesson that may not have been completely taken on board by his heir Lloyd Blankfein.

    Lansky's second innovation was to use mob connections to ensure legal and physical security of his establishments from other crime figures, and law enforcement (through payoffs). Goldman Sachs seem to have gone much further, in actually securing many top positions in government for their "alumni" so that they are actually in a position to print money to bail out the company, bankrupt rivals, and so on, which is a considerable advance. Blankfein would never have ordered a hit on Bugsy Siegel, he would have bailed him out to salvage the Mob's credit default swaps.

    I think the legislation quoted by Tom makes it clear enough that you can, for example, short a company if you predict that the stock will fall in value, but you can't short a company on a grand scale with the intention of forcing the value to fall, otherwise we would see companies shorting each other's stocks to soften them up for acquisition, or to make their rivals' exective's stock options expire worthless.

    But ultimately the decision whether to bring prosecutions is a political one. Clearly Madoff and Rajaratnam did not have the political connections necessary to obtain "diplomatic" immunity, but many probably do. [Also there can now be little doubt that Eliot Spitzer was brought down to earth because he was seen as a threat by too many powerful figures on Wall St.]

    Anyway, the broader point I am making is that bringing prosecutions in such cases tends to be a political decision
    May 19, 2011. 09:12 AM | 1 Like Like |Link to Comment
  • Digging Deeper: Options Expert Discusses Pinning, Max Pain and Apple (Part Two) [View article]
    I agree, and it merits further study, for example to see if there are any identifiable patterns in the future. Of course to some extent any really proportionally large trade will have a manipulative component to it, because a purchaser or seller of huge blocks of stock will always be aware that they cannot just be sold at market without affecting the bid/ask prices. I'm not suggesting that any crime took place, just what I said, that if we knew what drove that burst of trading, we would understand the behavior of the stock better.
    May 17, 2011. 09:03 PM | 1 Like Like |Link to Comment
  • Digging Deeper: Options Expert Discusses Pinning, Max Pain and Apple (Part Two) [View article]
    Thanks, this is an excellent article that probably explains a great deal of the tendency of casual traders to suffer at the hands of Mr. Max Payne.

    However, it would certainly be interesting to find out who was responsible for the changing of hands of 500,000 AAPL shares in 5 minutes last Friday that drove AAPL down nearly $3 to the Max Pain point. That is $170 million dollars worth of shares, which is not chickefeed.

    Maybe there is someone reading this who knows more?
    May 17, 2011. 08:29 PM | 2 Likes Like |Link to Comment
  • Digging Deeper: Clustering and Maximum Pain in the Options Market [View article]
    Philip Elmer-DeWitt is to be congratulated for spotting an incredibly easy and foolproof route to riches.

    All you have to do is sell the most popular in-the-money AAPL weekly calls and puts on Friday mornings and you will be laughing all the way to the bank on Mondays.

    I will give it a try before anyone else catches on.

    P.S. If you are reading this post, please keep it confidential and out of the hands of market makers.
    May 16, 2011. 10:31 AM | 1 Like Like |Link to Comment
  • Digging Deeper: Clustering and Maximum Pain in the Options Market [View article]
    Great stuff. Looking forward to the Pearson interview.

    One of the interesting things about AAPL is that if there was a 10:1 stock split the options would probably be at $2.50 intervals and thus the stock options would behave quite differently.
    May 16, 2011. 10:18 AM | 1 Like Like |Link to Comment
  • Here's How to Choose a Great Stock [View article]
    @ Dialectical Materialist.

    Maybe. Roaming charges for cell phones overseas tend to be very expensive. When I was in Haiti in the week after the earthquake there was free international calling, but some people got stung with HUGE bills for hundreds of dollars for messaging and data, which emphatically wasn't free.

    I have a cheap local phone here, but the $15 phones don't have cameras.

    Anyway, how confident are you in Apple stock going forward? What is the largest percentage of your investment portfolio that you would go long Apple over the next 2 years?

    See here for some photos I took last week in the US:

    seekingalpha.com/user/...
    May 8, 2011. 01:29 PM | Likes Like |Link to Comment
  • Here's How to Choose a Great Stock [View article]
    Yes, but seriously.... Right now I am in a hotel room in the Dominican Republic. There is no wi-fi in the room. With my Android tablet I can still transfer pictures from my camera to my pad via memory card and use a very cheap USB keyboard to write some messages or letters. Then when I get to a wi-fi hotspot at some bar or cafe, I can send them to friends in Europe.

    With the Apple tablet this would be much more awkward, it seems.

    Anyway, these are the kind of things that people who have BOUGHT Apple iPads are saying in reviews on Amazon.

    With regard to the memory card slots not being necessary, I see that some pad computers now come with TWO such slots, so clearly there must be demand for them and it is not just a question of designers not knowing what features to add.

    Anyway, I am just talking about what ordinary people find useful features on a pad computer, and here is one selling for only $138 and change with free shipping, that the owners seem to like.

    www.amazon.com/Coby-MI...

    I am sure that mystics like Steve Jobs and Osama bin Laden do not care about such things because they are at such a high level of spiritual development that to them things like camera are mere worldly toys, (actually I partially agree with them), but the average consumer wants something that will be useful NOW and has no time for:

    "Imagine no USB
    You can do it if you try
    No need for greed or hunger
    A brotherhood of wi-fi
    Imagine all the iPads
    Sharing all the world..."

    [Lyrics by John Lennon & Rookie IRA Investor.]
    May 8, 2011. 08:20 AM | Likes Like |Link to Comment
  • Here's How to Choose a Great Stock [View article]
    I have to chip in and say I agree, even if this is an admission that I have not yet eaten the apple of the tree of knowledge of good and evil.

    The link I am providing is to an android pad combo that includes a pad computer that has wi-fi, a case AND a USB keyboard AND a 16GB SD card all for about $225.

    As you will see, if you look at the picture, when the tablet is installed in the leather case together with the keyboard, it is damn near equivalent to a netbook, though you can still take the pad out and hold it as an e-reader, or whatever.

    I am not even remotely claiming that it is as "good" as an i-Pad, and I haven't tried this device, although I have something similar that I am very pleased with, but I suspect that something similar to this but better will soon be along from every manufacturer, and that a device like this will appeal to a huge number of people at a much lower price point than the Apple pad device.

    And they will be able to use it to type e-mails, or make it sit up and use it as a DVD player or music player, or do Facebook, or make Skype calls with it, or shop for shoes or music on Amazon, or listen to the BBC News, or read a newspaper, and be perfectly happy.

    And they won't care that that the Apple iPad can walk across the room and extract the pictures from their camera by some mystical means without using a memory card.

    www.amazon.com/10-2-Le...

    Google is, of course, fundamentally an advertising agency, and everything it does, whether it be the search engine, g-mail, Google blogs, or Android is basically a way of erecting billboards everywhere that people go online.
    May 7, 2011. 09:07 PM | Likes Like |Link to Comment
  • Here's How to Choose a Great Stock [View article]
    "The iPad does not have an SD card because that is not the way we will be using these devices in the future."

    Try: The i-Pad does not have an SD card slot, which would cost about $1.50 to add, because Apple wants you to pay $40 for a special application that will enable you to transfer pictures from a camera to an i-Pad.

    "Your assertion that Apple put a toll booth on Google for iTunes is off base and illustrates how wrong you are about what is happening here."

    I said YouTube. If you know better, you might at least explain what is going on. I understand that last week or so Google announced that it was getting into business with movie rentals on YouTube, thus moving into space already occupied by Netflix and Apple's i-Tunes store. I am quite sure that there must be some way in which Apple is, or is planning, to monetize the YouTube application on the i-Pad.

    "It does not bother me that Apple is in business to make money, but if you think that the real revenue generator is the content, you are once again mistaken."

    Well, the revenue from the i-Tunes store last quarter was $1.4 billion, which was 25% of gross revenues and projections for income from the Apple App stores were $2.9 billion for the year, so that would be about another 12% of gross revenues, no? So 37% of gross revenues between those two is a decent chunk of change.
    May 5, 2011. 10:58 PM | Likes Like |Link to Comment
  • Here's How to Choose a Great Stock [View article]
    "Apple made the quintessential MP3 player at the right time. Maybe it was luck, maybe it was genius. Then they did it again for the smart phone. Maybe lightning strikes twice."

    No, they got a bit lucky with the i-Pod, but the really clever part was when they moved on to the i-Phone which was a lot like the i-Pod with calling added on, and for which they by now had a ready made market (i-Pod users). At first a lot of people were sceptical as to whether the i-Phone would take off, but there was a certain buzz about it and, like crack, it found plenty of buyers without a lot of expensive advertising or marketing, even though it was moving into a market where the apparently addictive Crackberry already had a strong presence.

    The i-Pad is a further attempt to cash on on that sleek, shiny, minimalist look. I took a peek at the user reviews on Amazon. Out of 84 reviews, there were 10 one-star reviews, and 8 two-stars reviews, which is a lot of bad reviews. Usually on Amazon one star reviews are written by twelve-year-olds --Moby Dick sucks. I bought it because I like fishing...--but these negative reviews were serious ones.

    Almost unbelievably the i-Pad 2 has no SD card memory slot. My $150 Android pad does. How serious is this deficit? Well, I can easily copy what I am writing here with my mouse, paste in into Wordpad, save it as a pdf on an SD card, then put the card into my Android pad and read these words as an "e-book". With the i-Pad you cannot transfer a file, whether it be text, a photo, an e-book, music, or a movie onto the device by any simply mechanical means.

    Is this because Apple designers don't realize that most users would find this a useful feature. No, not at all. It is because Apple wants to create a closed system. The main purpose of the i-Pad is to connect owners to Apple so that Apple can sell them more stuff. This is the business model.

    It has always seemed to me that TV networks ought to have given TVs away free, because advertising was where the money was, but the problem would have been that it would be hard to stop people watching NBC on a CBS TV, so that was a non starter.

    Apple's smart idea is to SELL people a viewing device at a very high price, so that they can then sell them even MORE high profit margin stuff. Also the i-Pad won't play flash video (FLV), because Apple doesn't want you playing stuff from other sources on your Apple machine. There is an application for YouTube, but I imagine Apple has found a way to put a toll booth on Google for this.

    They could probably give the i-Pads away free and still make money.

    At least if we are going to invest in the company, we might as well understand their business model.

    Well, it seems like plenty of people are falling for it, and that is why the stock looks like it has legs for at least the next couple of years. But I don't think we should look at Apple as if the company is somehow infallible or superhuman. Every dog has its day. The i-Pad of today is the garage sale item of the future.

    Remember Polaroid?

    www.freestockcharts.co...
    May 5, 2011. 07:32 PM | Likes Like |Link to Comment
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