2nd Update w/ New Trade: AAPL: Bruised for the Moment but Still Pretty Shiny

by Dan September 15, 2011 9:51 am • Commentary

2nd Update Sept 15th: when I suggested this trade 3 weeks ago the stock was =$10 lower and now with 1.5 days to expiration the likelihood of the spread being profitable is not great.  I want to salvage the premium that I can and look to roll out to OCT and play for iPhone 5 release.  At this point with the stock at $391 I can sell the spread for about 1.00 or a 2.40 loss……Given the volatility in the markets and the uncertainty since Jobs’ departure as CEO, I think long premium was the right way to play.  Will be back with a new trade in the name.


Update Aug 26th 2011: With AAPL shrugging off the Jobs news and the markets shrugging off the Fed news, barring anything disastrous out of Europe over the weekend this rally off of today’s morning lows could have some legs…..AAPL fairly soon should announce a media day to show off new iPhone for a speculated launch in early Oct.  I think the announcement should come, or at-least the invite for the Press Event by Sept Expiration.  The stock couldn’t act better in what many thought was the “tape bomb” to end all tape bombs…..Techncally the chart looks brillant especially in light of the recent market volatility……the chart appears to be forming a flag and looks poised to break out to new highs…..

[caption id="attachment_4354" align="aligncenter" width="300" caption="1 Yr AAPL chart from Bloomberg"][/caption]


TRADE: AAPL $380.50 BUY Sept 395 / 410 Call SPread for 3.40

-Buy Sept 395 call for 5.40

-Sell Sept 410 call at 2.00

Break-Even On Sept Exp:

Profit: bwtn 398.40 and 410 make up to 11.60, above 410  make full 11.60

Losses: btwn 395 and 398.40 lose up to 3.40, below 395 lose 3.40 or less than 1% of the underlying…..

ORIGINAL POST Aug 25th 2011:  AAPL: Bruised for the Moment but Still Pretty Shiny

Frankly, I don’t have much to add on the whole Jobs thing.  My sense is that AAPL’s Board and most C-level executives there have been preparing for this moment for some time, while keeping their shareholders and the press in the dark.  In some ways it is hard to imagine that this is a surprise to anyone, at Jobs last public appearance in June at their developers conference, sadly to say the guy looked very unhealthy and his demeanor was not what the AAPL faithful had come to expect.

While the reasons for Jobs resignation are very sad, the guy has been an amazing visionary and the fact that all technology using humans on this planet have benefitted from his existence, makes it that much harder to dismiss his importance on what has appeared to be AAPL’s dominance on computing and mobile innovation over the last 10 years.  

Ironically, when you look at AAPL’s rockbottom valuation, it appears that it has already been trading like a “show me story” with very little embedded premium related to Steve Jobs.  Tim Cook who has taken over as CEO, by all accounts is the only man for the job, and I guess when you look at the company’s performance where Cook manned the helm during Jobs’ previous medical leaves, he has done a pretty good job.  I guess one of the biggest risks is that AAPL’s best and brightest depart to take higher-level positions like AAPL’s head of retail who recently left to be CEO of JCP…..I would suspect that without the lure of being around greatness that many top managers will depart to chart their own path.

As for the stock it is trading down about 2.5% in the pre-market, up from the almost 5% drop last night following the announcement.  I suspect this to be a non-event in a sort of counter-intuitive shout out to Steve Jobs.  Every large shareholder knew this day was coming and if they hadn’t sold already for fear of his departure, I am not sure why you would now looking down the barrell of back to school, new iPhone at possibly 3 major U.S. carriers, potential major Mac refresh and then the holiday selling season.  Other than risks associated with the markets, it would appear that the company has the wind at their backs for the coming months.

But again, any mishaps on execution, Cook will be on the hot-seat.  They obviously need to keep putting out innovative products with sharp and consistent execution.

SO WHAT TO DO TODAY? Last week I took off a September 375/400 Call Spread (read here) that I owned for hope of an iPhone 5 announcement and possible release by Sept expiration.   I sold it because I was worried the markets, and because most bloggers who traffic in AAPL rumors seemed convinced that iPhone5 release date was early Oct.  On today’s weakness I will look to re-establish a bullish position out to Oct or Nov.  Nov could be interesting as it will capture this quarters earnings and iPhone launch.  Check back after the open for my new trade.