Options Open Interest
Chart Levels broken Trough
OK, here we are again...AAPL may drop below $500 (pre-market right now $498). This week there is "triple-witching" (or is it meanwhile four-witching even?), i.e.; options expiration on Friday . At the same time - who would have thought beforehand just how much AAPL dropped . ====> Lots of traders have been caught wrong-footed and a lot of puts are in the money already (or about to get there) At $500 there is an open interest peak of contracts expiring this week. The same at $530, which is getting out of reach soon: Already now it would take a dramatic turnaround to get there.
I believe (but of course it's just that -- my belief) that this week there is more pressure to keep the price below $500 -- so as to wash these options holders out. There are other theses round the web that say that due to Fibonacci levels there we may touch 481, 471, even 414. I think 481 is more than realistic.
I am actually someone who uses chart marks, too. They do not change the company (a price breaking through support does not make Apple a better or worse company) but people do use them for orientation -- and trade on chart formations.
If you, dear reader, are someone who refuses chart analysis and only likes P/E, PEG etc let me sing you the Beatles song: "... You say "Stop" and I say "Go, go, go" ..."
Also, the options open interest is a very important factor - especially during expiration week. Because it involves margins on accounts, possible early - even forced - liquidation etc.
Prediction (and I will put my money on it if "Part I" turns out right):
Weakness this week with new lows below $500 continuing.
Rebound after option expiration; possibly even moved forward to Friday. If we are (still) real weak by Thursday I will put some money on a bullish options trade before market close.
Disclosure: I am long AAPL.
Additional disclosure: (somewhat) bullish AAPL position is through a combination of long and short options; also with some downside hedge.