Weekend Updates

  • Posted: 21 July 2012 11:37 AM #61

    Two things:  holdings going into earnings and the effect of the divvy.

    Effect of the divvy
    - very darn little, IMO.  Apple is an unproven dividend company, and I hypothesize that much of the dividend buying has happened already.  A divvy under 2% without a history of dividend growth of over 10% a year is not going to excite most dividend investors.

    Continued share price appreciation with the start of a dividend will incite some to buy, but a lot dividend investors don’t look for double digit share price appreciation, they are reinvesting their dividends and prefer that share price stay flattish to up slightly. 

    Full divvy disclosure, I have built, over the past few months, a divvy portfolio that is has a yield on cost of 6.1%, if I disregard one high flyer, the yield on cost of the remaining 8 positions is 5%.  My goal when all is said an done is somewhere around 30-40 positions with an average yield of somewhere between 4 and 5%.  So far, in terms of share price, the divvy part of the portfolio is up 5.8%.  Overall it is 21% of our IRAs

    Holdings going into earnings.

    Two positions - Jan 2013 $550’s, 17% of the IRAs, up 8%.

    Jan 2014 $600’s, 60% of the portfolio, up about 60%.

    Portfolio is up 279% YTD, 2% cash as of the close on Friday.

    I know I am going to hold the Jan 2014’s through earnings.

    I am unsure about the Jan 2013’s.  I can make a good case for holding or selling those to raise some cash.  I’ll let y’all know what I decide.

    My largest concerns are the US fiscal cliff and China growth.

    Unless the fiscal cliff thing is resolved, I am a bit nervous about the Jan 2013 position, but I do not think that goes into effect by Tuesday afternoon.

    [ Edited: 21 July 2012 11:40 AM by roni ]      
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    Posted: 21 July 2012 12:05 PM #62

    roni - 21 July 2012 02:37 PM

    Two things:  holdings going into earnings and the effect of the divvy.

    Effect of the divvy
    - very darn little, IMO.  Apple is an unproven dividend company, and I hypothesize that much of the dividend buying has happened already.  A divvy under 2% without a history of dividend growth of over 10% a year is not going to excite most dividend investors.
    snip….......

    That was spot on Ron!

    JMO, but the announced divi is a total joke. The only way that chicken S divi makes sense is if Apple bumps it up (significantly) on a regular basis. Hopefully TC will comment on this issue during the ER. 

    FWIW, I think there’s a good chance of Congressional chaos leading to a fiscal/confidence crisis later this year. I believe this will be the #1 headwind for aapl this year.

      cheers to the longs
          JohnG

         
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    Posted: 21 July 2012 12:07 PM #63

    lovemyipad - 20 July 2012 09:13 PM
    Mav - 20 July 2012 09:00 PM

    Scaling in or more aggressive?

    I’m being more conservative for the moment, but it feels like AAPL could retest 600 or below by Tuesday, particularly if the FUD wave continues.

    Well, I’ll tell you what I did, but I’m not holding it up as any model of good trading.  In fact, seeing as I allowed emotion (irritation) to play a part, I should hold this up as a model of BAD trading, even if it works out.  See, I wasn’t *entirely* objective in placing these trades…I was kinda flipping the bird to the EOs…as if they care about little ole me! :D

    I bought next week’s weeklies: 645/650 bull spreads @ .70

    Um, that wasn’t the REALLY bad part…I, um, kinda sorta also bought, er, well..quite a few, ah…  weekly 665/670 bull spreads @ .20   smile


    EDIT: Mercel and JD, I know, I *know*!!!  I went to the dark side!!!  I’m part of the problem now, not the solution!!!  Believe me, I know!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    Interesting.  For the 645/650 it looks like a run up to about $625 before earnings will double your investment.  Must break through $620.  For the 665/670 a run up before earnings to about $618 will double your investment.  One below $620, one above $620.

    Blow out earnings and good guidance and you stand to make a lot of $$$$$$$.

    May the force be with you.

    Signature

    Waiting to be included in one of Apple’s target markets, but I still own an iPod, iPhone and iMac and APPL stock.

         
  • Posted: 21 July 2012 12:39 PM #64

    johnG - 21 July 2012 03:05 PM
    roni - 21 July 2012 02:37 PM

    Two things:  holdings going into earnings and the effect of the divvy.

    Effect of the divvy
    - very darn little, IMO.  Apple is an unproven dividend company, and I hypothesize that much of the dividend buying has happened already.  A divvy under 2% without a history of dividend growth of over 10% a year is not going to excite most dividend investors.
    snip….......

    That was spot on Ron!

    JMO, but the announced divi is a total joke. The only way that chicken S divi makes sense is if Apple bumps it up (significantly) on a regular basis. Hopefully TC will comment on this issue during the ER. 

    FWIW, I think there’s a good chance of Congressional chaos leading to a fiscal/confidence crisis later this year. I believe this will be the #1 headwind for aapl this year.

      cheers to the longs
          JohnG

    You go farther in your description of the dividend than I would smile

    I think the announcement on March 19 has already been supportive of Apple’s share price, and my thinking is that the dividend will be increased on an annual basis.  I also think that Apple shares will be appropriate for many Growth and Income portfolios.  Once Apple gets a record of respectable annual dividend increases (10% a year or more), more income investors will come to Apple with each successive increase.  Rome was not built in a day and Apple’s main attractiveness now comes of its share price appreciation. After a few years of increased dividends, it will become more attractive to dividend growth investors - who look more at the growth of dividends than the initial yield at purchase.

         
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    Posted: 21 July 2012 03:16 PM #66

    iPad, I gotta say, those 645/650 and 665/670 BCSes are pretty…well…aggressive. :D

    Did you have earlier earnings trades still in play?

    Me personally, I got lotsa fun options from which I should choose carefully.  Sep 630/700 or so is an intriguing appreciation capture play that gives me extra time to be right in exchange for lower alpha.  A +15 to +20 day should still be profitable even though the move would be short of the BCS theoretical parameters.  Looking at a smaller weekly option buy or two as well, but that’s hugely Monday-dependent.  Plan to enter a pre-market order to remove as much emotion from the trade as possible.  If I can’t get my price there’s still my Aug calls and/or Sep/Oct options strategies.

    [ Edited: 21 July 2012 03:18 PM by Mav ]

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.

         
  • Posted: 21 July 2012 03:34 PM #67

    Im staying in for earnings but CMG has scared me.

    Im hoping apple can make up some ground there are 2 trading days left. If apple can somehow get to 620 then I wont be as worried.

         
  • Posted: 21 July 2012 03:47 PM #68

    nate010203 - 21 July 2012 06:34 PM

    Im hoping apple can make up some ground there are 2 trading days left. If apple can somehow get to 620 then I wont be as worried.

    Same here. At 620 I’d feel like the attempts to pin down toward 600 are over, positive sentiment has started taking hold, and the next round of trading in a constrained price range and options pinning manipulation will take place in a higher band.

         
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    Posted: 21 July 2012 04:07 PM #69

    Why would CMG scare anyone in AAPL?  Consider

    (1) what CMG is

    (2) what industry it’s in

    (3) its relative valuation/price action

    (4) why it got hammered after earnings

    [ Edited: 21 July 2012 04:10 PM by Mav ]

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.

         
  • Posted: 21 July 2012 08:28 PM #70

    roni - 21 July 2012 02:37 PM

    Two positions - Jan 2013 $550’s, 17% of the IRAs, up 8%.

    I have been giving some thought to rolling these out and up to April at some yet to be determined strike price.  @ $620 strike price, I think I could get 4 contracts for every 3 I close.

    Crazy, man - Dig it.

         
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    Posted: 21 July 2012 08:28 PM #71

    Mercel - 20 July 2012 11:19 PM

    (...)
    Seriously, the ONLY time I’ve ever lost trading options is when I get too bullish and own options that expire within 3 months…
    (...)

    +644

    Though for me, I should add “too bearish” as well, so how about: when I get too short-term direction-biased with front month options.  If I have TIME, I can adjust (or wait) when the market moves against my position.  But if necessary, the kind of scrambling required for damage control on front month options requires tremendous dexterity.  Plus, it’s stressful.

         
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    Posted: 21 July 2012 08:50 PM #72

    Mav - 21 July 2012 06:16 PM

    iPad, I gotta say, those 645/650 and 665/670 BCSes are pretty…well…aggressive. :D

    Did you have earlier earnings trades still in play?

    Me personally, I got lotsa fun options from which I should choose carefully.  Sep 630/700 or so is an intriguing appreciation capture play that gives me extra time to be right in exchange for lower alpha.  A +15 to +20 day should still be profitable even though the move would be short of the BCS theoretical parameters.  Looking at a smaller weekly option buy or two as well, but that’s hugely Monday-dependent.  Plan to enter a pre-market order to remove as much emotion from the trade as possible.  If I can’t get my price there’s still my Aug calls and/or Sep/Oct options strategies.

    Mav, even if those trades turn a profit—objective is only to double, then dump half—they were stupid trades, so it would be luck not skill.  The better entry—aggressive yet *skillful*—would have been to wait until Monday at earliest, and Tuesday optimally.

    My next closest expirations: AUG’12 630/650s and AUG’12 660/680s.  I’ve scaled in and out of those (batches of 3-5 spreads) for weeks, so very little of my original capital remains in them.

    RE: SEP’12…my thought there is that if you wind up “needing” extra time, you may likely “need” until OCT’12.

    Currently, I plan to unload all of my AUG’12 and OCT’12, plus a chunk of JAN’13, the morning after earnings.  I already have “replacement spreads” in place for APR’13, so this is my version of “rolling.”  Then I redeploy that capital during the late summer or early fall WTF sales.

    [ Edited: 22 July 2012 12:42 AM by lovemyipad ]      
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    Posted: 21 July 2012 09:09 PM #73

    rickag - 21 July 2012 03:07 PM

    (...)
    Interesting.  For the 645/650 it looks like a run up to about $625 before earnings will double your investment.  Must break through $620.  For the 665/670 a run up before earnings to about $618 will double your investment.  One below $620, one above $620.

    Blow out earnings and good guidance and you stand to make a lot of $$$$$$$.

    May the force be with you.

    Thanks, rickag!  I’m thinking if IV goes up, that alone will do it.  IV is lower than I’ve ever seen this close to earnings.  The strategy itself isn’t a bad one, but from a risk management perspective, the timing was lousy—more gamble (on IV) than skill, which is very NOT me.

    But I was grouchy because I theorized the EOs were deliberately keeping IV low to tank the prices of expiring JUL’12 options.

    IMHO, the more skillful approach would have been to wait until Monday at the earliest or optimally Tuesday to assess which way the wind’s blowing.  In my experience with short-term options (for anyone who doesn’t already know this about me: I hate/avoid short-term options because too much can go wrong too quickly!!!), it’s less important to get the best possible price, more important to have confidence in the immediate direction.

    [ Edited: 21 July 2012 09:14 PM by lovemyipad ]      
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    Posted: 21 July 2012 10:22 PM #74

    lovemyipad - 22 July 2012 12:09 AM
    rickag - 21 July 2012 03:07 PM

    (...)
    Interesting.  For the 645/650 it looks like a run up to about $625 before earnings will double your investment.  Must break through $620.  For the 665/670 a run up before earnings to about $618 will double your investment.  One below $620, one above $620.

    Blow out earnings and good guidance and you stand to make a lot of $$$$$$$.

    May the force be with you.

    Thanks, rickag!  I’m thinking if IV goes up, that alone will do it.  IV is lower than I’ve ever seen this close to earnings.  The strategy itself isn’t a bad one, but from a risk management perspective, the timing was lousy—more gamble (on IV) than skill, which is very NOT me.

    But I was grouchy because I theorized the EOs were deliberately keeping IV low to tank the prices of expiring JUL’12 options.

    IMHO, the more skillful approach would have been to wait until Monday at the earliest or optimally Tuesday to assess which way the wind’s blowing.  In my experience with short-term options (for anyone who doesn’t already know this about me: I hate/avoid short-term options because too much can go wrong too quickly!!!), it’s less important to get the best possible price, more important to have confidence in the immediate direction.

    Funny you say your too early.  I thought you timed it perfect as I expect a run up before the market opens.  Just in case I have 3 orders saved;  20 665/670 @ 0.18.  10 655/660 @ 0.36 and 6 640/645 @ 0.85.  If the pre market does run up I won’t order.  If it doesn’t I will at most place two of the orders, probably only one,  chicken I am, definitely not a high roller.

    I would also be willing to take 2/3s to 3/4s off to get my investment back.

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    Waiting to be included in one of Apple’s target markets, but I still own an iPod, iPhone and iMac and APPL stock.

         
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    Posted: 22 July 2012 12:07 AM #75

    iPad, allow me to play Devil’s Advocate for a sec.  If Sep 12 isn’t enough time (and I’m not saying you’re saying that), Oct 12 won’t be fundamentally different.  The way I see it, the Oct 12 (expiry Oct 19) will almost certainly expire before October earnings.  If there’s some “dog days” transitional quarter bummer whatever going on until the fall based on groupthink of no new iPhone in fiscal Q4 2012 to help earnings, and it’s not balanced out by iPad optimism, moving one month out from Sep 12 isn’t likely to help me much.

    The only way to really mitigate the transition risk is by going with Jan 13s and later.  The rest…is just a kind of educated gambling on earnings. :D And I’m OK with that, should I end up walking down that path…certainly wouldn’t be the first time. LOL

    [ Edited: 22 July 2012 12:11 AM by Mav ]

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.