Big Printin’ – $AAPL, $QQQ

by Dan January 27, 2016 3:59 pm • Commentary

Apple’s (AAPL) commentary on the global macro environment has certainly spooked tech investors, with the stock down 6.4% as I write,  placing the stock down 30% from its all time highs made in April and down 11% on the year.  To be clear, the one comment that stuck out like a sort thumb from CEO Tim Cook:

we’re seeing extreme conditions unlike anything we’ve experienced before, just about everywhere we look

This from a guy who back on the morning of August 24th, when AAPL’s stock was down 15% in one fell sweep felt the need to pen CNBC’s Jim Cramer an email to read to the world stating that all wuz good in da China hood:

“I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks.”

Obviously a lot has changed since August, but last night’s commentary about the near term headwinds in China and the rest of the emerging world, and the adverse affects of the strong dollar has been a bit of an about-face for a company that many investors thought was immune to such mundane things.

Options volume has exploded today, with total volume about 2x average daily with calls outpacing puts 1.5 to 1.  An interesting trade that caught my eye:

The trade was a very long dated bullish roll when the stock was $95.77.  A trader sold to close 31,000 Jan 2017 100 calls at 8.65, and bought to open 16,500 Jan 2018 95 calls for $16.275.  This trade was done for even money.  The trader essentially swapped out about $27 million in premium from Jan 2017 (one year away) to Jan 2018 (2 years away), but rolled down the call strike for half the size.  This trade now breaks-even at $103.65 on Jan 2018 expiration.


QQQ: Another trade that caught my eye was in the Nasdaq 100 etf the QQQ, of which AAPL makes up 11.5% of the weight. In fact AAPL, MSFT, AMZN, GOOGL and FB make up 40% of the weight of the etf, with the AAPL the only stock in the group to report so far.  Today when the QQQ was $102.37 at 1:35pm, a trader bought to open 70,000 of the Feb 100/95 put spreads for $1.06.  This trade breaks-even at $98.94, with profits of up to $3.94 between $98.94 and $95 with a max gain of $3.94 at $95 or lower.

Taking a quick gander at the 10 year chart of the QQQ you can see that the etf is one of the few large cap equity indices that has not tested its Aug 24th flash crash lows. It’s not far from its long term uptrend though:

From Bloomberg
From Bloomberg