Controlled by Hedgies—-but for how long?

  • Posted: 05 August 2010 06:39 PM

    Even though I have some understanding of the game hedge funds play so ably with AAPL, I am still impressed by the length of time they can keep a good stock like Apple’s down.

    Given how undervalued AAPL is, I would expect that there would be great temptation for hedge funds to let AAPL ride much higher before knocking it down again. Wouldn’t riding a 25% gap up between floor and ceiling be preferable to a mere 5-10% before they short and pound it down again? Or is it that the hedgies figure that several 5-10% rides can be had for each potential 25% ride? And perhaps by keeping AAPL further underwater it has greater buoyancy for the ride up and therefore is a more predictable bet?

    I believe that AFB estimates of $300 near-term and $400 farther out in time (DT et al) make fundamentally good sense, but such goals are way overdue already and that makes me wonder if the market professionals might be able to keep AAPL far underwater until Apple finally has a run of bad luck and we no longer have such strong fundamentals on our side. How long can they keep this up?

    I would appreciate it if those AFBers who have a better understanding of Wall Street than I could offer some insight into this situation. I worry that 6-12 months more of this market manipulation may run out the clock on us (and my Jan ‘11 calls!).

         
  • Posted: 05 August 2010 07:19 PM #1

    I have been reading here since 2006. Yours is a theme repeated often. I’ve read the best of the best here and all I can say is to roll those options up and out and pray with the rest of us.

         
  • Posted: 05 August 2010 10:43 PM #2

    The success of your calls, and all those other future bets, including leaps, will cost some entity money. Hedge Funds have a vested interest in slowing things down so a lot more positions will be closed before they have to pay out.

         
  • Posted: 06 August 2010 10:49 AM #3

    I agree that this is their intent.

    But would any AFBers care to post a guess as to how long the major market players can keep AAPL in the $240-$280 range before its profit-generated buoyancy pops AAPL above $300?

         
  • Avatar

    Posted: 06 August 2010 10:56 AM #4

    Hannibal - 06 August 2010 01:49 PM

    I agree that this is their intent.

    But would any AFBers care to post a guess as to how long the major market players can keep AAPL in the $240-$280 range before its profit-generated buoyancy pops AAPL above $300?

    IMO they will start getting some pretty good metrics on Apple’s qtr toward the beginning of October until then the can play the lack of news either side of the trade.  Once hard data starts rolling in they place their bigger bets and either cash out before the actual announcement.  The only unknown is what Apple says at special events.  So the Sep/Oct iPod special event could serve as a catalyst for a trade.

         
  • Avatar

    Posted: 06 August 2010 12:43 PM #5

    IMO there is no conviction on either side. no buyers or seller. The volume is amazingly low. We have been given data points, earnings and numbers and we are $22 below last qtrs stock price. The “hedgies” have been keeping a low profile as far as I am concerned. To many low volume days where they could have hammered to stock and they haven’t. Just my .02

    I am thinking about getting fitted for a bear suit today. Dang, to hot in Ga to be a bear. :bugeyed:

    Signature

    Adversity does not just build character, it reveals it.

         
  • Posted: 06 August 2010 04:30 PM #6

    Pats, thanks for the timeline perspective.  It makes a lot of sense and gives me some hope for my Jan ‘11 calls.