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Exposing An Illusion

 

I said earnings will be after opex. CORRECTION: I meant to say; "earnings will be BEFORE opex. Earnings will more than likely be on 01/17/12. If ER is after opex, I will reevaluate. 

  • Jon808

    Travis was right – huge volume spike in last hour of trading Friday pushing AAPL past $400. For next week, weekly option chain show hi call OI at $400 & $410. Could the next ceiling to break be $410?? Guess won’t know until trading starts…

  • Steve

    So with so much O/I at 400, we should gravitate to that price right?

    • If your talking the monthly $400 OI, I would ignore it. As far as the weekly goes, not sure if we break thru it this week or not. If we do it is extremely bullish. Either way next 4 weeks we are going higher.

  • AnnieA

    Great video, Travis! Just before I watched it I was wondering what it meant when put OI exceeded call OI and you explained it.

    Now here is another question and I hope you won’t laugh at how basic it is: When you look at put and call prices you have to either subtract or add them to the price of the stock to tell at what point you are in the money, right? So, if 400 calls are going for $11.00 and $380 puts are going for $7, then the true range of the stock price will be $411-$373. Right? That puts the midway point at 392. If you only consider the OI price itself, the midway is $390. This makes a real difference if you are considering buying or selling puts or calls, if you want the max premium without losing the stock.

    Am I totally whacked thinking about it this way?

    • Hey Annie,

      We are all learning together #1. Let me get back to you tomorrow on this answer. I wanted to let you know I didn’t forget about you.

      • AnnieA

        Thanks for that, Travis. I think I get what you mean if I correct the last sentence to read: “Commercial money sold your that option so they get their $11 if the options expire under $400.”

        That makes sense of the second sentence in the next paragraph. The only thing I don’t understand is the part about “commercial money sold you that option.” That’s only true when I buy options, not when I sell them, right? And I might be dealing with individuals like you and me.

        I’ve been selling covered calls very actively for nearly 20 years, but looking at the world this way is an eye opener and I am glued to CBOE right now to watch how it all plays out.

        I really appreciate your taking time to write and have a merry Christmas!
        ~Annie

  • Bonitaken

    Thanks Travis.

  • RJ

    Travis, thanks for this..key take-away for me for the weeks leading into earnings is that AAPL will likely NOT move below $380, likelyhood is that the path to $400 will be greased as there is little incentive for MMs to manipulate the stock to below this amount. Correct? I too see AAPL moving to $400 in the coming weeks and perhaps $400+ just days before earnings when the manipulators get out of the way because the chances of blow-out earnings are too high.

    • That is the correct way to look at it. Look where AAPL won’t go, not where will. For the Jan’12 expiry, it is highly unlikely for AAPL to be below $380.

      • Sean

        Hi Travis, what happens if ER is after January Expiration? Does this mean Manipulators will kick in and keep the Jan options under 400/410 or so? I’ve sold a lot of 435/440 Jan Call Spreads. I’m thikning about buying them back because of the chance earnings might shoot this stock up to 450. But it all depends if ER happens before january expiration. If before, then I’l definitely buy them back. Is that sound logic to you?

        • Do you have a gain? If ER is after opex, then the stock definitely won’t run as high as it would if say, options never existed. If ER is after opex then you would probably be ok. I’d rather close them out though.

  • Anonymous

    Travis, “by the looks of this (Jan 21 month) AAPL won’t be budging, will sit at $380 for the next 4 weeks…” How does January ER affect this suppression? You think buyers will come in after Jan 1?

    • Thats how I started the the topic off, but then went into how my diagnosis of the options shows in reality the $400 calls aren’t what they seem. With earnings coming I wouldn’t worry about the $400 calls holding AAPL down.

  • jack

    Travis,

    Great work. Why did you say Jan OpEx was before Apple Q1 earnings release? No one knows when apple will release earnings yet. Correct?

    Also, how high can APPL go prior to Jan OpEx? You never really gave a price outlook.

    • I put a corrective comment under the video. From following AAPL overtime you can forecast when earnings will be. No, it’s not officially published. The options market isn’t showing a limit as of now. Limit-less is the current answer. Plus this opex will be considered an ‘event’, so anything can happen. We can still use the options market to help guide though.

      • TomOshea99

        Wow. Glad to see the correction on timing of earnings. I really hope you are right.

        What do you base your Jan 17 estimate based on? I looked at the earnings history and couldn’t discern a pattern. What do you see Travis?

        • Mani

          I’m not so sure anymore that earnings will be before OPEX … let’s not forget that Apple is adding an extra week to this quarter. I think it makes sense that this would push earnings out by a week. Any thoughts on this?

          • @Jack, Mani

            True. If it is the week after I will reassess. Hopefully ER is before opex.

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