Wednesday, June 26, 2013
AAPL: Mass hysteria ?
A PUT with strike 400 and expiry Jan 2015 is priced at $69 and change today. At $331, I would buy AAPL anytime between now and 2015 and don't believe for a second that AAPL is going to stay below 400 for long. Plus there are two Thanksgiving-Christmas seasons between now and expiry of this PUT. Look also at some other famous stocks that have missed a quarterly forecast or two and suffered a big drop of very high magnitude and see where they were within a year. Mark this as something to revisit in January 2015 and see in the rear view mirror for a worthwhile lesson, whichever way it goes.
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Hi Ram...This is Kumar and this is my first comment. I noticed that you recommended shorting longer dated puts on AAPL struck at 425 on 6/15 and more recently at 400. Premiums are high for a reason on these puts as no one has a clue as to the evolution of the mobile/tablet market. The stock has transitioned from a growth darling to a value play, and when this happens with tech names...they often go into long periods of hibernation. Witness MSFT, INTC, CSCO etc etc. It is also an over followed name by both institutions and retail and tends to react negatively anytime a podunk analyst mouths off. The technicals do not look good at all. So I would not be a seller of puts on this name. More importantly, if you ever get exercised at those low breakeven points it is painful...the stocks take a long time to recover from these break downs and there is a real opportunity cost to having capital tied up. Not to talk of the daily mtm swings in the position. The trade probably makes sense if you are not concerned about marks, not otherwise. So you really need to have a longer term, truly "investment" viewpoint. Best.
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