2010 Option Question

  • Posted: 30 December 2008 10:50 AM

    I have 2010 200’s and bought in around 20 per contract. At the time it seemed like a great price?I should have sold when they near doubled, but alas, I did not. So here we are now at a cool .80 a pop. If I can scrounge up some more cash, a proportionally small amount could almost double my contracts and lower my “break-even” contract price to about 10.5 per contract. Even though that seems like a pipe dream, it does seem much more realistic that these contracts will get back to the 10-13 range than the 20 range. At this point is this just stupid? I go back and forth (my wife doesn’t?she just thinks its stupid all the time). It seems like a small risk to take in some ways. Thoughts? Thanks for your input.
    Dan

         
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    Posted: 30 December 2008 06:06 PM #1

    Superbaka, that’s an unfair characterisation. See my earnings and revenues forecasts, not my PPS estimates, which were for a different climate. The long-term estimates I devised and published in January 2007 for results through to 2010 were - and remain - pretty accurate. I called the top pretty much, and I forecast the bottom with pin-point accuracy (so far) with precisely the correct scaling-in strategy once it became obvious prior to Q3 that the bottom was about to fall out and the stock fall into the hands of maniupaltive hedge funds and liquidation cash-raising syrategies.

    “Events, dear boy, events” as one of our ex-Prime Ministers used to say when asked about what could upset his careful plans for the UK many decades ago. Well, we’ve got the biggest event of the last 100 years in the financial markets. However, Apple’s story remains undiminished; its the environment that stinks. I’ve been right. I remain right. I might be poorer as a result of my positioning, but my hedging of my LEAPS with having sold calls against them saved me from going negative on the year, and I thank Eric Landstrom for reminding the more sceptical and short-term memory members on AFB with my advice back pre-Q3 earnigns when I said the stock was too toxic to trade, and investors should build up un-leveraged and long-term positions to ride out the volatility.

    That’s where I remain, and nothing’s changed my mind. Thanks to Andy Zacky and Deagol for keeping the discussion on-topic and as analytical as ever, but as I pointed out a few months ago, nobody cares about fundamentals any more: its all about whether Steve had one crap or two this morning, and what its consistency was, that matters. There are only traders in this market, not investors. Position accordingly. But Apple is only just getting started. When the carnage ends, who do you think will be standing tall: DELL, HPQ, PALM, and RIMM…. or AAPL? I know who my money would be on.

    [ Edited: 30 December 2008 06:08 PM by Tommo_UK ]

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    Posted: 30 December 2008 09:40 PM #2

    Dan,
    Just incase you missed this, here are a couple of links that Eric provided on another link. Part #1, and Part #2 . If Mr. Dents predictions are true, you will have a chance to escape Tommos’ advice.

    Best of luck.


    :apple:

    [ Edited: 30 December 2008 09:54 PM by MacCube ]      
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    Posted: 31 December 2008 05:22 AM #3

    [quote author=“artman1033” date=“1230671139”
    THINGS COULD GET MUCH WORSE!!!

    But, your option is now 80 cents….You have lost 90%....
    You might as well hold on to it now!
    Buy MORE!!!!

    I sure would NOT!!!

    Yes things could get much worse, but inspite of everything, AAPL has still held above crucial support in the 80-85 region so far (even when Steve was reported to be virtually dead yesterday). That shows how washed out the selling is - at least unless the environment really does get much much worse (which indeed it could - for once I find myself agreeing whole-heartedly with Artman! smile )

    If you must shop, buy the 2011s or wait for the 2012s….

    [ Edited: 31 December 2008 05:24 AM by Tommo_UK ]

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  • Posted: 31 December 2008 09:48 AM #4

    The most positive thing about AAPL I have seen in a while was the way the market reacted to yesterdays Gizmodo rumour/story. When it broke the stock dropped rapidly on market orders but only to the $84 area and then recovered in the ensuing hours. This to me is very telling. So much so that I purchased a bunch of Feb 90 calls. (Feb because earnings are announced after Jan expires) As Tommo points out this stock is washed out. There was $32 billion in hedge fund redemption’s in November and December looks like $80 billion in redemption’s. Apple seems to have found a bottom. The big question is how long till it and the market gets off its deathbed. The 2011 Leaps have a lot of the beta knocked out of them and the OI is low, and its my choice for the best way to play the company. At least that is what I am doing.

         
  • Posted: 31 December 2008 10:58 AM #5

    I agree with SNIPUS and Tommo regarding 2011 Leaps as the best way to play AAPL now.  Apple the company is still firing on all cylinders, and EVENTUALLY this will impact the stock.

    I won’t follow SNIPUS’ decision to purchase Feb calls.  Apple probably has just finished another great quarter, but if we have learned anything this year, it’s that good earnings won’t move the stock unless the underlying market is moving up.  There’s a chance the market moves up in the first quarter, but not a good chance. 

    I will only consider a short-term option when there is clear evidence of an underlying market upturn.

         
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    Posted: 31 December 2008 11:26 AM #6

    macorange - 31 December 2008 02:58 PM

    I will only consider a short-term option when there is clear evidence of an underlying market upturn.

    ...which will be sabotaged by a downgrade from Ms. Hubberty or a rumor on Gizmodo.

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  • Posted: 31 December 2008 11:51 AM #7

    macorange - 31 December 2008 02:58 PM

    I agree with SNIPUS and Tommo regarding 2011 Leaps as the best way to play AAPL now.  Apple the company is still firing on all cylinders, and EVENTUALLY this will impact the stock.

    I won’t follow SNIPUS’ decision to purchase Feb calls.  Apple probably has just finished another great quarter, but if we have learned anything this year, it’s that good earnings won’t move the stock unless the underlying market is moving up.  There’s a chance the market moves up in the first quarter, but not a good chance. 

    I will only consider a short-term option when there is clear evidence of an underlying market upturn.

    Quite wise macorange as it is a high risk trade (the feb options) I do so for the following reasons.
    a) bad news is hardly affecting the stock
    b) An Obama rally first 2 weeks in Jan
    c) there is virtually no MacWorld hype or froth in the stock
    d) the earnings are going to blow out the analysts.
    E) low IV, low expectations, still a lot of fear and a lot of money on the sidelines dying to pile into Tech and in particular Apple.
    I also note that seasonally Apple drops after MacWorld and does not normally recover till late spring. This seasonal selloff is baked in I think

    This is a contrarian play that will triple my investment or lose a third IMO

         
  • Posted: 31 December 2008 12:20 PM #8

    artman1033 - 31 December 2008 04:11 PM
    SNIPUS - 31 December 2008 03:51 PM

    Quite wise macorange as it is a high risk trade (the feb options) I do so for the following reasons.
    a) bad news is hardly affecting the stock
    b) An Obama rally first 2 weeks in Jan
    c) there is virtually no MacWorld hype or froth in the stock
    d) the earnings are going to blow out the analysts.
    E) low IV, low expectations, still a lot of fear and a lot of money on the sidelines dying to pile into Tech and in particular Apple.
    I also note that seasonally Apple drops after MacWorld and does not normally recover till late spring. This seasonal selloff is baked in I think

    This is a contrarian play that will triple my investment or lose a third IMO

    I agree with many of your points…..BUT


    WHAT IS THE HURRY!!

    Why not wait until january 10th to 19th.

    What is the MADOFF factor?

    How many individual investors and big pension funds who only meet four times a year will decide in the first 15 days of january to reallocate all of their investments?

    I like the idea of Feb AAPL calls….. just not yet.

    cause today is the last day for a lot of Hedge selling and we could get a pop first week in Jan. Also I bought when the stock tanked yesterday and I do not expect another hit like this for a while. Also I always buy to high and sell too low

         
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    Posted: 31 December 2008 12:30 PM #9

    Here’s my 2 cents on options/calls having made a ton on them in ‘07 only to give most of that back in ‘08. Even jumping into ‘10s, ‘11s can be very risky and IMO isn’t worth it at this point unless you really have funds that you can risk. No one knows how long this downturn is going to last. It could be 6-9 months or it could be several years. Of course, you could get rich picking the bottom with options here (if the market rallies back in the not too distant future) but that’s a gamble that many here can’t afford to take. If this economy continues it’s downslope or stalls, the time value will get sucked out of those before you know it. Look at the AAPL chart from ‘01 to ‘04, long-term options would’ve been dead money unless you picked tops and bottoms.

    I was surprised when people were saying that they were dumping common shares but holding onto Leaps earlier in the year. Unless they were hedged, that wasn’t a particularly good strategy IMO. Until we convincingly break out of this downtrend, I won’t be touching them except for the occasional swing trade. Of course, there are other options strategies that take advantage of the choppiness that we might see for awhile but I don’t think that’s what the original poster was talking about.

         
  • Posted: 31 December 2008 12:36 PM #10

    SNIPUS - 31 December 2008 03:51 PM

    This is a contrarian play that will triple my investment or lose a third IMO

    How do you structure the investment in short-term calls so you only lose a third?

         
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    Posted: 31 December 2008 12:50 PM #11

    ChasMac77 - 31 December 2008 04:30 PM

    Here’s my 2 cents on options/calls having made a ton on them in ‘07 only to give most of that back in ‘08.

    I resemble that.  rolleyes

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  • Posted: 31 December 2008 02:20 PM #12

    macorange - 31 December 2008 04:36 PM
    SNIPUS - 31 December 2008 03:51 PM

    This is a contrarian play that will triple my investment or lose a third IMO

    How do you structure the investment in short-term calls so you only lose a third?

    This is my estimation… If the option is not in the money by mid Jan then I bail. If it is I will hedge at a higher strike. It is more like a mental stop.

         
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    Posted: 29 January 2009 04:09 PM #13

    Anyone still with 2010 200?s (or more)?

    Snipus? Tommo?

         
  • Posted: 29 January 2009 04:56 PM #14

    Tullio - 29 January 2009 08:09 PM

    Anyone still with 2010 200?s (or more)?

    Snipus? Tommo?

    Got a bunch of 2011 120 calls and am short just a few Jan 2010 120’s and used the cash to buy gold mining shares ( GG)

    Last I heard Tommo was in the Alps drinking schnapps with some wartime refugees

    [ Edited: 29 January 2009 04:59 PM by SNIPUS ]      
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    Posted: 29 January 2009 05:58 PM #15

    Thanks Snipus!


    I think I’m toasted.