Apple share’s sharp drop at the open the result of one large sale

“What happened to Apple earlier today? About 9:50 a.m. ET it went from roughly $117 to $111, a fairly significant drop of over 5 percent,” Bob Pisani reports for CNBC. “The usual market rumors quickly surfaced: A fat-finger trade was the most common. There were also product rumors, none of which seemed plausible: iWatch, iPad, even hacking rumors.”

“Occam’s Razor says the explanation with the fewest assumptions is usually the correct one. In other words, the most likely explanation is usually the right one,” Pisani reports. “After talking to several traders, here’s the explanation with the fewest assumptions: Someone sold a ton of Apple. Very fast”

“It looks like someone was trying to sell several million shares in a short period of time. A large seller comes in, and the price dropped, then recovered a bit. That’s how markets work,” Pisani reports. “Still, you can’t help but think if this seller would have been a bit more intelligent, they could have lessened the price impact.”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Arline M.” for the heads up.]


    1. Ya but if your selling 6,500,000 shares and its dropping $6 as your doing this, you are losing millions and it’s all your own doing. It’s not like someone puts an order in that large, and it executes at the price you entered it.

  1. How to explain Hedge Fund Machinstions 101 to a clueless author?

    1. There’s this market maneuver called “shorting” that makes you money when the price goes down.
    2. If you sell short a whole of stock at the same time, then buyers are insufficient and the price plummets. This used to be illegal until a few years ago when the SEC removed the “price uptick rule” to improve (hah!) “market liquidity”
    3. As the price falls, automatic orders to sell (“stop loss orders”) are triggered, accelerating the plunge.
    4. The short selling hedge fund buys the stock back at the bottom (“covers”) for a huge profit.
    A well-known maneuver: “stop loss harvesting”

      1. There was in the past, now perfectly legal (as long and there is no proven collusion). All part of the SEC’s sacred fetish for liquidity and price discovery. The problem is that so doing in effect robs small investors with stop loss orders and also disrupts the stock’s momentum “technical picture” used by algorithmic traders, by making the stock appear more “toppy” etc.

    1. That’s not what happened, of course, but good story. There was no big repurchase at the end of it.

      It’s much more likely that somebody had some other position go wildly wrong, and so were forced to raise cash immediately. When the cash was not forthcoming the shares were sold out from under him. That’s what happens on a margin call. If you can’t cover it your remaining holdings are sold until the margin is satisfied.

      Theses so-called hedge funds blow up all the time. They take on big risk (with somebody else’s money) and hope to reap big rewards. Sometimes it goes the other way.

  2. Morgan Stanley downgraded Apple this morning. Big deal. The ups and downs of analyst regrading have a short-term focus. Traders will jump in lock-step. But unless a company in which you invest is showing a significant change in its fundamental business results, ignore this. The long-term investor will simply shrug off the whims of the analysts and keep an eye on the future.

    There is nothing to indicate that Apple will not continue to grow its earnings and cash generation. And for a long-term investor like myself, that is what matters, not some short-term change by an analyst.

    View this as a potential buying opportunity.

  3. So this was a scam. Making money on the short and recovery. They had the shares to begin with. I think we shoud be able to tell who was responsible. Frankly this caused a lot of people with auto sell, to loose money. This has to be illegal if it’s not.

    1. I’m sorry, but if you’re long AAPL and have a trailing stop loss in at 6% below they’re current price, I don’t think you qualify as an investor. I think you’re more likely a trader, and not a very bright one at that. AAPL investors probably have a stop loss in at 70% of the current value, if they have one at all. This is all just noise. Put on your Beats headphones and drown it out.

  4. This should really be investigated. It seems unlikely that someone went to sell over $6 Billion worth of Apple stock and put in “2 minutes” instead of “2 hours”, but stranger things have happened.

    That said, it seemed likely that Apple would be down today. It’s been roaring upward for a while now, and many were influenced by high black Friday projections that fell flat over the weekend.

    Apple should have no problem recovering from this.

  5. I was just cautioning someone here a couple of days ago about stop loss orders for Apple. I learned years ago that you can get picked off that way, as it happened today. If you had a stop loss order in place at say $112, and Apple dropped from $118 to $111, then rebounded immediately to $115, then you just locked in a $3 loss if you buy back at $115. I never use stop loss orders on Apple.

    That said, I also never buy or sell at market price. I conduct all transactions as limit orders. Whoever entered this large sell order obviously entered it as a “market” order. A limit order would have taken longer to execute and affected the price less. As it is, even a market order takes time to execute, and does so in batches, so the seller created a large loss for himself by using a market order (Or perhaps he used a limit order, but set the minimum price at maybe $110: same effect). There was no reason to sell in that short a time period at that time of day except to manipulate the stock price. It’s possible that the seller made a bundle by previously selling calls at $115 or so, which are now under water. That would be more likely if we were closer to options expiration, but it’s a thought.

  6. I trust Apple, but Wall Street absolutely cannot be trusted. There are too many shady things going on. But as was said before, if you’re looking long-term, don’t worry about what happens to Apple on a daily basis. I’m only wary, but certainly not worried. Apple likely had a very Black Friday and will likely have a good Cyber Monday. What’s there really to worry about. Maybe Apple bought back some more shares during the drop which is helpful to shareholders.

    Wall Street investors need to stop playing with profitless stocks hoping for future growth gains. At least Amazon, LinkedIn and Tesla took one on the chin today. Those investors need to get a wake up call every so often. Microsoft breezed on like it was coated in Teflon and there don’t seem to be any calls for profit-taking (it’s probably headed for $50). Tomorrow will be business as usual and today will be forgotten.

  7. I bet WS shysters preyed on their investors. If it was a single entity that sold, I bet it is managed by these shysters (probably a pension fund).

    I wonder if one large investment house wanted to buy in? Could be that there is a large position of covered calls that needed to be protected. Nevertheless, I believe that the shysters sold off a position of one of their managed accounts. I cannot believe they sold their own positions. They probably cleaned-up on their covered calls.

  8. “Occam’s Razor says the explanation with the fewest assumptions is usually the correct one”

    Is that what Occam’s Razor really says? If so it means God (inteligent design) wins over Evolution. Then again, what do you expect from it’s inventor, William of Ockham (c. 1287–1347), who was an English Franciscan friar and scholastic philosopher and theologian.

    Sorry, a little off topic.

    1. Occam’s Razor is usually used in the academic world. The journalist quotes Occam’s Razor as “the explanation with the fewest assumptions is usually the correct one”” whereas the principle is usually used among competing hypotheses principle (the one with the fewest assumptions should be selected). I certainly don’t think it’s appropriately applied here, but hey, what can you expect from journanalists.

      I don’t know why you brought in the idea of Intelligent Design vs. Evolution into this. One can certainly apply the principle of Occam’s Razor as it is a useful tool in physics but it is a very dangerous implement in biology.

      Consider briefly Intelligent Design (Creationism) vs. Evolution. The basic assumption is that the two are mutually exclusive. The other assumption is that the two are not mutually exclusive.

      Closely related to this argument is the creation of a new being, rather than an entire species. Following the Creationism vs. Evolution idea, this would bring forth a Creationism vs. Reproduction debate. In this debate the argument for Creationism would say that a deity (god if you wish) creates all individuals, from Adam and Eve. The argument for Reproduction would say that individuals (not just humans of course) are created from sexual or asexual reproduction. There is a good deal of evidence suggesting that the latter is true so based on the assumption that the two are mutually exclusive Reproduction wins the Creationism vs. Reproduction debate.

      Using the assumption that they are not mutually exclusive you have the idea of Creationism and Reproduction. Here a deity could create some individuals (say Adam and Eve) just as well as reproduction could create new individuals. As they are not mutually exclusive there is no debate required, both can happen.

      A similar approach can be used for the Creation vs. Evolution debate. There is a lot of debate material brought forth when discussing this topic and it’s all based on the idea that these two approaches are mutually exclusive. However if you consider that these two processes are not mutually exclusive it allows the idea of a deity creating a bunch of species at the start of creation and then new species arising from them through the process of evolution.

      Note here that the number of assumptions are the same (one they are mutually exclusive the other they are not) but debates only really happen when the assumption is made that the ideas are mutually exclusive. As Occam’s Razor ties into the Principles of Plurality (Plurality should not be posited without necessity) and Parsimony (It is pointless to do with more what is done with less) one can now test the conflicts that will emerge:

      A mutually exclusive creationist will argue with a mutually exclusive evolutionist and vice versa.
      A non mutually exclusive person will not argue with either.

      Thus using the principles of Occam’s razor the resulting hypotheses is that of Creationism and Evolution.

      However, I doubt that you or most people here (I could be wrong) have even thought or considered the “Creationism and Evolution” approach, yet it is the approach that I use and I’ve never had it been successfully challenged.

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