“Short-term market participants have been using [Apple Inc.] shares in what are known as pair trades – betting that one stock will go higher while hedging that bet by short-selling a stock expected to go lower,” Jeff Cox reports for CNBC.

“It’s a strategy that has worked particularly well over the past five months as Apple (AAPL)’s stock has crumbled while the rest of the market has surged higher. Anecdotal evidence from traders indicates that it’s essentially an unraveling of the opposite trade that had been taking place prior to Apple’s fall,” Cox reports. “The pair trade also helps explain why Apple’s fall from grace was so rapid and aggressive.”

Cox reports, “The stock is heavily owned by mutual fund managers, with more than 1,000 having it as a top-10 component. Two-thirds of its shares are held by institutions. So the drop from the September high could be at least in part due to simple portfolio rebalancing in which the stock more than tripled in value over a two-and-a-half year period.”

Full article here.