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  • A Strategy For Playing This Week's Apple Earnings [View article]
    Not sure if a strangle through post-earnings is the best option on this one.

    Volatility on Feb options will plummet after earnings where even if you get an underlying movement in apple up or down, it may not be enough to offset the option losses related to volatility plummeting.

    If you don't want to pick a direction on stock price, you can do a bull call spread and a bear put spread. This will help reduce losses related to volatility decreases.

    i personally have apple going up after earnings, and I have no downside protection. but i am an "all-in" type of guy.
    Jan 21 12:26 PM | 4 Likes Like |Link to Comment
  • A Word To Rocco Pendola About Apple And The Financial Media [View instapost]
    wow, what a hit piece. I don't mind you blowing up on Rocco, and you go through incredible effort to validate the WSJ reporting.

    However, your entire argument blows over the most important fact, which was point #4. The wall street journal jumped to the major conclusion, which was purely speculative, that the reduction in orders was from "weaker than expected demand".

    A number of factors could explain the reduction in orders for that one supplier:

    1. Apple is switching suppliers
    2. Apple is changing product mix (new phone / different type of screen from a new supplier)
    3. Apple knowingly over-ordered during ramp-up to make sure supply was there for roll out.
    4. Weaker than expected demand

    The source (a supplier), nor the wall street journal, could possibly know this was from "weaker than expected demand" so this is why people are pissed.

    All of your other points in this article is just "noise" so you can unleash your anger on Rocco.

    At the end of the day the WSJ article should have been retracted for their "weaker than expected demand" conclusion.
    Jan 20 01:05 AM | 1 Like Like |Link to Comment
  • Worrying Wednesday: How Low Can Apple Go? [View article]
    Hi Phil, for the record, I think your trade offered in the video is brilliant, gives leverage and profitability even if apple trades down.

    the previous comment seems unfair from bobtcat2, but I am not familiar with what he is claiming so I will let you defend yourself.

    Also, I reviewed your comments on the other post. I understand for TV it is not easy to fully explain all trades, however, I still stand by my numbers -> if apple were to trade to 450 and stay there till Jan 15, it would represent at best a 44% return and not "triple your money".
    Jan 17 05:31 PM | Likes Like |Link to Comment
  • Worrying Wednesday: How Low Can Apple Go? [View article]
    Hi Phillip. I watched your video and first time I saw you doing commentary. I really enjoyed.

    However, I am just wondering if you gave the correct technical details on your interview.

    #1. The trade is using different calendar periods (bull spread jan 2014, write uncovered put in jan 2015), and you refer to "expiration" at least twice, which expiration you did not make clear.

    #2. The strategy involves writing an uncovered put. This has alot of implications, particularly around calculating any profitability of a trade. additionally, this requires the highest level of option trading capability, level 4, which alot of people will not even have.

    You stated that the trade will produce will triple your money if apple stays at 450 dollars at expiration.

    If we break that down, we can split the trade into 2 parts (as mentioned before, the bull call spread, and naked write put). We will also assume a Jan 14 expiration of 450 and then apple stays at 450 for entire year, and we take it all the way through Jan 15 put expiration.

    1. At 450 the bull call spread basically breaks even. I think this one is an easy one to agree.

    2. The put would expire worthless which means you get to keep the full credit of $3,850.

    Most brokerages will require at LEAST the following as the minimum amount of cash to secure the put (10% of the strike price exercise value of the underlying stock PLUS 100% of the option premium value). So your net credit stays in holding pattern + 10% of strike price (350 * 10% * 100 shares) = 3,500. I am actually being generous here, as the requirement could be much higher based on other conditions.

    This would imply the following for the total return on your trade

    = Gain / Investment outlay
    = 3,850 / ( 5,250 + 3,500)
    = 3,850 / 8,750
    = 44% =
    = This trade is also more or less exactly 2 years long, so
    = ~22% annual return

    22 % <> 300% -> "tripling your money" if apple were to trade at 450$

    Finally, your interview does not at all highlight the maximum possible loss for this trade, which would be a
    ~36,500 loss if apple were to trade below 400 at Jan 14 expiration and trade at 0 at Jan 15 expiration.
    Jan 16 08:36 PM | 1 Like Like |Link to Comment
  • Apple Fire Sale: Part 2 - The Rocket Blast [View article]
    JM - so far your thesis was wrong. I think you will be vindicated though on Jan18th at 4:01 PM. after some detailed analysis of trading behavior and news i think we will see the rocket blast then.
    Jan 12 12:46 AM | Likes Like |Link to Comment
  • Creating A New Valuation Metric: FPEGA [View article]
    ohh, me again. also FPE / G ration is actually not used widely for a reason.

    Forward earnings is a projection of the company's growth. so using an FPE and then growth % again is double counting. this is why PEG is the more widely accepted figure b/c the future is fully capture by just the growth the percent.
    Jan 12 12:31 AM | Likes Like |Link to Comment
  • Creating A New Valuation Metric: FPEGA [View article]

    Two Things:

    1. You promised like a year ago that if you were going to keep talking smart that you would drop your fisherman pic and get a professional photo. If you want those 200 followers to become 2,000 followers you need to look like you just got out of lunch at Goldman Sachs.

    2. great try with your metric, but I do see some flaws.

    First, trading above or below a 50 day moving average as a % base is not the best technical metric. If a stock is trading 4% below it's moving average, but has been below its moving average for 30 days it is trending downwards. Based on your formula the 4% discount, (.96) multiplier will help drive your metric lower (which represents an improved score). the negative price consistency makes this a very bearish measure and you should not be improving your metric.

    Conversely, your examples of mastercard and visa are currently in a bullish uptrend with 50 day increasing XX days, and the 50 day above the 200 day for XXX days, but you are penalizing them in your formula.

    I have done something similar to the following approach. Start with your base metric. Assume your FPE / G = .8 for a given company.

    Now you want to apply a technical factor that can further improve or worsen the metric.

    I would start it with a 120% technical multiplier. If your stock passed zero technical bullish screens then it would stay at 120% and would calculate as

    .8 * 1.2 = .96

    Now, how much work do you want to do? 8 bullish technical screens, 12 technical bullish screens? The first thing to keep in mind, one bullish signal usually makes another not possible.

    1. 50 day above 200 day for 60 trading days
    2. 50 day crossing 200 day in last one week (if number 1 was true, then number 2 can't be true)

    Pick some other popular bullish signals:
    3. RSI(15) crossing 20 in last 2 weeks and RSI(15) crossing 40 in last 1 week
    4. MACD histo crossing 0 in last 1 week, MACD fast crossing over Slow in last 2 week
    5. MFI(15) Increasing for 10 days and MFI(15) crosses 50 in last 3 days
    6. Fast %K crossed above slow %K in last 5 days
    7. ADX(14) above 40
    8. Price crossed above Bollinger band and closed above.

    So, lets say if a stock passes 5 of these screens you give it a perfect score. So you would want to make the technical multiplier 80%. (40% / 5 score) = 8% for each pass.

    So a technical score of 3 would be a 96% multiplier.

    Not sure if you have ever used stockfetcher before, but it has some of the most amazing and and easy technical screens I have ever used. I highly recommend them.

    So to summarize, the perfect score technical of 80% would change the .8 FPE / G ratio = .8 * .8 = .64

    So, if you do something like this, I would love to see your work on the top 10 companies in the S&P 500.

    I would call it the FPEGT score, where T = your technical multiplier
    Jan 12 12:11 AM | Likes Like |Link to Comment
  • Year-Over-Year Apple Q1 Comparison: Projections, Estimates, And Actual Results [View article]
    have you ever heard of a price pegger?
    Jan 3 10:01 AM | 1 Like Like |Link to Comment
  • Can A New Management Team Spur Growth In This Undervalued Tech Company? [View article]
    hi turner, i agree with cicero, fantastic research work.
    Jan 2 01:15 AM | Likes Like |Link to Comment
  • An Aggressive But Well-Balanced Conservative 2013 Portfolio [View article]
    it is not "well-balanced" if all of the risks are heavily weighted in one sector.

    you should not use "well-balanced" and "portfolio" in your title, if your picking stocks you like that have just different risk factors.
    Dec 30 12:41 PM | 1 Like Like |Link to Comment
  • An Aggressive But Well-Balanced Conservative 2013 Portfolio [View article]
    hi george, thank you for your article, but i really don't like the "portfolio" with the premise that you say it is balanced.

    you have 4 core technology companies, of which all msft/nok and bb are heavily competing for 3rd place in market share for smartphones. and then the juggernaught of apple

    the success of one will be at the potential failures of others creating a potential wash situation.

    you have zero exposure to industrials, financial, energy, consumer staples, consumer retail, transportation.

    you have indirect exposure to healthcare with a medical device firm.

    not sure how this is balanced.
    Dec 30 12:16 AM | 2 Likes Like |Link to Comment
  • Apple Fire Sale: Part 3 - The Playlist [View article]
    this is the link to the march expirations:
    Dec 29 04:39 PM | Likes Like |Link to Comment
  • Apple's Slow And Steady Search Attack [View article]
    Hi Joe Small Cap,

    Your article offers an interesting perspective on SIRI.

    I would agree that SIRI offers an indirect way for apple to execute on search, which could eventually lead to direct competition with google.

    However, your thoughts on mayer, and yahoo and apple hooking up for search are not plausible in any fashion.

    first - the quote you give from mayer was when she was working at google, and if you didn't know, android already offers voice recognitioon search capability, which in many ways is more powerful than SIRI. when she gave that quote, she was the vice presidnt of search products and user experiences.

    additionally, if you knew anything about mayer, you would know that she majored in Artificial Intelligence, so to be honest she probably would have given you the same quote when she was a freshman at stanford.

    if yahoo abandons bing, they will either reimplement their own search or go to google. not sure how any of it has relevance to SIRI.

    your thoughts on apple acquiring something for search are completely possible. so good thoughts there.
    Dec 28 08:55 PM | 2 Likes Like |Link to Comment
  • Time For Some 2013 Predictions [View article]
    Bill great predictions. It is nice to see you finally not so hard on Apple. I love the table that you give of PE to earnings. I am not so worried as you and I think Apple will easily hit $50 eps. Tie this into periods around new product rumors, pure stock momentum, and positive cash allocation strategies (supply chain, dividend, buybacks) and I would predict that apple breaks $800 at one point this year.

    Your other predictions I like as well. Great article.
    Dec 27 08:50 PM | 1 Like Like |Link to Comment
  • Apple Fire Sale: Part 3 - The Playlist [View article]
    Hi all and J.M.,

    another great article. I love it when the authors on SA throws out multiple ideas to the investor so that the investor can decide based on their risk and bias towards the stock.

    I commented on another apple post recently, because whenever we start talking about options it is important people really know what the heck they are getting into.

    Have you ever owned a call option, it was slightly OTM (out of the money) and your underlying stock went up 1%, but your options went down by 10-15%, when you were expecting it instead to go up 10 - 15%?

    There are two primary things that drive the price besides besides the underlying security and these are:

    1. Implied volatility (perceived risk in the underlying stock)
    2. Time decay

    Hedge funds are experts in making sure both of these things always work in their favor. Unfortunately, Option #2 and some of the other options have these things working against you.

    Generally speaking, when volatility is HIGH, you want to be a seller of options, and when volatility is LOW, you want to be a buyer of options.

    Please note, regardless of whether you are buyer or seller of options, you can still choose to be either or bull or bear for either approach depending on the implemented options strategy.

    so let me show it works against you.

    Let's assume you bought the 600 call strike, Feb 13 expiration. This cost 5.45 right now, so $545 total investment for this strike.

    Currently apple has HIGH volatility. Mostly because of sharp price declines, fiscal cliff, and upcoming uncertainty around earnings.

    Apple's current Implied Volatility = 38%. Now lets run the scenario, its Post earnings, post fiscal cliff, and its Feb 6th, 10 days before your options expire, and now you want to sell.

    However, you can easily expect volatility to come down to 25%. If you want to look at historical volatility, I like this free site alot:

    Look at last Jan, post earnings you will see volatility plummet post earnings.

    So, back to our trade. Apple made a nice run, and got all the way to $590 post earnings.

    Well, predicting IV and time decay, I can tell you definitively that the option price when apple is trading at 590 will be on Feb 6th will be ~$4.60. This would mean an $84.00 loss.

    so apple rebounds strong, and you lose money, nothing more frustrating than that.

    So how can I make IV and time decay work for me? Well, since Volatility is super high, you want to SELL. here I would recommend a BULL put spread.

    Also, since everyone is very interested in making large gains, and not having "gains" capped, I will do a fairly large spread for illustration purposes:

    Buy a 525 put, feb exp -> 35.90 -> $3,590

    Sell a 725 put, feb exp -> 210.85 -> $21,085

    This creates a net credit of $17,495.

    The amount of "capital" needed for this trade is to be able to cover the maximum possible loss = $2,505

    So if apple were to trade to 725 or higher by feb expiration, you will achieve a maximum possible gain of 700% (17495/2505), not bad for 51 days.

    However, the beauty of this trade is the flexibility. Lets go back to feb 6th and assume apple is at $590, and IV went down to 25%, what is the profitability?

    You will be able to close your vertical spread and keep $3,800 of the original $17,495. This would mean you would still have a 150% gain (3800/2505) for 41 days.

    This surely looks better than the $600 call option that you lost -15% on.

    The other beauty of this trade. On Feb 6th, if Apple is trading at 549 and your thesis was wrong, you are actually still at breakeven (no loss).

    The conclusion, as I did on my previous post of apple options is trading, is to be smart and pretend your hedge fund trader, become a shark and make IV and time decay work for you, instead of against you.
    Dec 27 08:36 PM | 3 Likes Like |Link to Comment