“To ordinary investors, the trading in Apple (AAPL) shares last week must have looked a little crazy. On Monday, when the Dow was up, the stock fell, only to shoot up $9.98 (3.17%) the next day. On Thursday, when the Dow was down, the stock was up $8.62 (2.67%). If Apple could have held on to those gains, it would have registered a rare $15.91 bump from Monday’s close,” Philip Elmer-DeWitt reports for Fortune. “But on Friday, in a pattern that Apple investors find depressingly familiar, the shares fell again and closed at $326.35 — just about where they ended up the previous week.”
“To AAPLPain’s Travis Lewis, who has been following the trade in Apple weekly options since they began exactly one year ago, it all made perfect sense. Apple almost had to close somewhere between $325 and $330 — the so-called Max Pain range — because there was too much money at stake to have it end the week anywhere else,” P.E.D. reports. “According to the theory of Max Pain, a stock in which options are traded will tend to close on the day the options expire, absent a major news event, at the point that causes the most pain to people buying options and the maximum profit to those selling them.”
P.E.D. reports, “It certainly seems to be true for Apple, whose options last week (as they are most weeks) were the most heavily traded of any U.S. stock. In 52 weeks, Apple has closed within $1 of Max Pain 39 times.”
Read more in the full article here.
[Thanks to MacDailyNews Readers “Dan K.,” “Connor MacBook,” and “Jax44” for the heads up.]
I pray that there is karma, because there obviously is no justice!!!!!!!!!
You obviously do not understand the true meaning of the word “karma.” Look it up some time. Karma is not some mystical version of “what goes around, comes around,” though such outcomes are always subsumed within it. It simply means “action.” one does not hope or pray for karma. It simply is what it is. Check out the idiot’s guide, er, Wiki pages here:
http://en.wikipedia.org/wiki/Karma
http://en.wikipedia.org/wiki/Karma_in_Buddhism
It’s not Karma that you need, it’s KarlMarx. Guess there wouldn’t be any trading at all. Just kidding.
Er, they lost a pretty big lawsuit to Nokia, and oh yea, the Tech sector is in a huge slump and, oh yeah, Apple’s the biggest tech company on the NYSE.
Seriously… this is mystery? Wait till Sept.
Apple’s listed on the NASDAQ, not the NYSE. 21st century betting parlors, nonetheless.
Thank you for correcting the NYSE error.
Wallstreet won’t be able to ignore the new iPhone 5 and iPad 3 when they arrive this fall. Buy the long options and avoid the short options
MacHeadB,
Wallstreet does not care about new products,,,, only making money on the controlled rise and fall of stock prices. PERIOD.
In the old days, the idea was for the average man to be able to have some share in companies, not just big mogals.
But today its all about the quick buck in jacking up the price so you can sell, then dumping and making the price crash so you can buy low….
Most older bigger companies have been so stable for so long that its really hard to jack their prices. Apple is so new and such a climber that its much easier. In fact the market movers have gotten so greedy with Apple stock manipulation that most of us hope they will get caught and jailed…… at a minimum.
Just a thought,
en
One thing they can’t ignore, though they might try, is all the cash spilling out of the Emperor’s wardrobe. In this case he does have clothes, too much to hide and it’s growing. Balance wil come it’s just gonna happen fast.
Before any real rally of Apple stock can take place to the next level, I have noticed that the share price of Apple will usually drop by $50–$80 from its previous high. The previous high was around $360 and the price will have to drop to $280 to be considered the tripping point for a rally. However it will also depend on the economic climate.
$50 from high would put it at $315 ….. Apple hit $310 so we have hit lower end of your number, or are you hedging your bet?
Earnings is under month away and Apple’s quarter ends today, I think so the next month should prove interesting!
Yes, there is something to the claim. 39 out of 52 is just too often to be coincidental. It’s easy to play the game according to Kramer.
They pay some jackass reporter/analyst to float a bogus FUD about some product delay or supply shortage and then short it to their target price. Of course it doesn’t work all the time, but if it works the majority of the time like 39 out of 52, they laugh all the way to the bank.
What would paying dividends or a stock split do to the options market for Apple?
@silverhawk Probably very little. What would be disruptive is a share buyback. If Apple were to use some of its cash to buy back shares, it could push the stock price up, out of the options range. But there are probably rules on what Apple can do, I don’t think they can just step in on Thursday to start buying shares on the open market, as much fun as that would be to watch….
More of the article which tells it all:
Defenders of the options markets disagree, but Lewis, like many in the shrinking pool of retail investors, believes that that weekly trade in options now overshadows trading in the underlying stock. It has become, these critics say, the tail that wags the dog. This can be accomplished in one of two ways — or both:
By outright manipulation, i.e. buying or selling stock to keep its price within the Max Pain range. This is illegal.
By “normal” hedging. This occurs when options that are “in the money” are closed. For example, when Apple hit $331.23, some holders of the $330 calls would have sold them to a market maker and taken their $123 profit. That would put the market maker “long” a call. To keep his books in balance, he will usually sell 100 shares, creating downward pressure that tends to drive the stock back toward Max Pain. (See here for a former market maker’s vivid description of other hedging strategies.) All this, as far as the SEC is concerned, is perfectly legal.
“Either way,” writes Lewis, “AAPL is being artificially moved. It is not being priced on supply and demand or the valuation of the underlying stock.”
Apple options are doing nothing but make money for those who control the game.
I think all stock traders should be banished to the Matrix.
Having made the move to 4x some years ago, I can’t understand how anyone who is serious about investing would waste another minute of their time trading the equity market.