New Trade AAPL: Fading WWDC, Downside June Put Spreads Look Attractive

by Dan May 22, 2012 11:55 am • Commentary

Enis’s Chart of the Day from this morning highlighting the increasing frequency of 5% daily moves in AAPL, left me thinking one thought after reading his conclusion – this is not bullish price action for the near term.

Investors clearly have their fingers on the trigger, and if the recent FB ipo fiasco highlights anything about investors risk appetites is that they are certainly fickle, especially about the unknown.  AAPL and FB have few similarities in my opinion, but the most obvious one is that both have a very fervent customer base which for just a few days/hours/minutes in FB’s case translated into an exuberant investor base.  

We have stated this many times in the last few months about AAPL, the stock is a very different animal than the company and the products they make, and happy customers should not confuse the two.  FB users/turned investors would have been wise to have separated the 2 emotions.  I have no clue about FB’s future prospects, I would fully expect the stock to be back above the $38 ipo price in the near future, but I wouldn’t buy the stock with your money, I don’t believe in the business, I am not a user of the service, nor will I ever be, and I think their business model is challenged unless they come up with something in a Steve Jobs”esqe” fashion that changes the course of a company that I believe is likely to leave the stock trading much like AMZN on hope and prayers.

Which leads me to AAPL, one of the finest companies in the world.  I am a happy customer, and not an investor in the stock.  But I like to trade it, and I think given the recent fall from all time highs and yesterday and today’s quick reversal of almost 1/3 of the stocks losses from the April Highs, I want to take a shot that next month’s build up into their annual World Wide Developers Forum, starting June 11th, which I think will be disappointing.  I expect no new major products, aside form the rumored Macbook  refresh, (Sigh) and I think the stock will likely re-test the lows in the coming weeks that were just made days ago.


TRADE: AAPL ($567.25) Bought the June 550 /520 Put Spread for 6.50

-Bought 1 June 550 Put for 10.00

-Sold 1 June 520 Put at 3.50

Break-Even on June Expiration:

Profits btwn 543.50 and 520 make up to 23.50, max gain of 23.50 if stock 520 or below

Losses of up to 6.50 if stock btwn 543.50 and 550, max loss of 6.50 if stock is 550 of higher


Technically I think the chart has broken, and I go back to a chart Doug Kass published a couple months ago here….

The fever has broken and we think we see 500 before you see 634