AAPL Reality Sinks In Sub-$600 As Option-Overlays Lifted

Tyler Durden's picture


AAPL tested down to its 200DMA last night after-hours, only to get 'algo'd up to VWAP to maintain some credibility for all the analysts of the world who choose to ignore guidance (rightly or wrongly). Amid heavy volume this morning, now that options are open and put-overlays can be lifted (as we noted last night - and VIX futures are unavailable on IB) so early VWAP orders have given way to more broad-based selling pressure as AAPL's stock has broken back to a 5-handle for the first time since July.

AAPL's last 24 hours...


AAPL Put volatility is dropping fast - which just as we suggested last night prompts us to believe managers were long Puts to protect and are now unwinding the protection AND reducing equity exposure...


and VIX futures are having problems...


In english this looks like this:

  • Managers were grossly over-weight (in their books) AAPL
  • Wanted to reduce weight as AAPL's weight in index reached peak levels and fundamental cracks started to show
  • Last few weeks have seen VWAP sell orders dominating
  • BUT - the algos can only clear so much and given the huge breadth of holdings...
  • Managers bought Option overlays with both hands and feet (as we noted yesterday) to protect through earnings
  • And today - with options open, they are unwinding the protection (implied vol dropping even as stock price plunges) and reducing net long exposure in size (see volume)...

Bottom line - long-only managers will retain exposure (as index trackers) but clearly need to unwind some weight and anyone telling you this is all short-sellers is incorrect - the simple facts of VWAP fades and implied vol dropping suggests its long-exits as the cult of AAPL maybe coming to an end...

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Fri, 10/26/2012 - 12:04 | 2921804 idea_hamster
idea_hamster's picture

B A A A A A A -- A A P L -- A U M G A R T N E R!

Fri, 10/26/2012 - 12:13 | 2921825 slaughterer
slaughterer's picture

Wish AAPL would get it together.  It is dragging down my AMZN and NFLX //lol.  

Fri, 10/26/2012 - 13:02 | 2921968 Conman
Conman's picture

I'm telling you Short AMZN long AAPL is the pair trade of the century. (just not today, haha)

Fri, 10/26/2012 - 13:09 | 2922006 redpill
redpill's picture

Hey, who took my hamburger?

Fri, 10/26/2012 - 12:07 | 2921814 The Count
The Count's picture

Wasn't there a news story just a couple weeks ago that Apple will going to pull the entire US economy out of the recession? When you hear stories like that (I remember 1999 when 25 year old brokers went on record saying that the markets could never go down again.) you know its time to get out. 


Fri, 10/26/2012 - 12:07 | 2921823 BLOTTO
BLOTTO's picture

Every dog has its day...


Wait until MICROsoft makes a come back against its foe.



Fri, 10/26/2012 - 12:13 | 2921846 CPL
CPL's picture

Nope...MS did somethign really dumb. Windows 8. It is now synonmous as Vista on introduction.


Balmer is a piece of shit and his name is mud from this point forward.  He decided to be "trendy" and it will cost him one company.  His.

Fri, 10/26/2012 - 18:11 | 2922801 blunderdog
blunderdog's picture

But don't you think it was about time they got rid of the start menu?  

That was always a big complaint I heard from people: "Why do they have to put everything important that I use constantly in just ONE location?  Shouldn't it be hidden from view and nestled a few layers deep into the interface?"

The waiting is over.

Fri, 10/26/2012 - 12:09 | 2921832 alstry
alstry's picture

7 Billion People.....One Planet......Limited Resources....and we are all milking each other in a bankrupt world?

We better start thinking as time is running out as many are simply thinking about the next gadget?

It truly has become an http://www.udderworld.com where we are all milking each other for bankrupt promises and failed systems.

Fri, 10/26/2012 - 12:17 | 2921856 ReallySparky
ReallySparky's picture

Go away.

Fri, 10/26/2012 - 12:23 | 2921870 alstry
alstry's picture

Why do you think it's a ZERO HEDGE?

Fri, 10/26/2012 - 13:27 | 2922079 edifice
edifice's picture

Yes, every 80 years or so this happens. It's cyclic. A new system will replace the current one. Look to history, my friend.

Fri, 10/26/2012 - 12:09 | 2921833 spastic_colon
spastic_colon's picture

O/T Tyler(s) - any insight or opinion on why the Fed just announced a 5 month delay in part 2 of their reserve requirement simplification process?

Fri, 10/26/2012 - 12:10 | 2921837 slaughterer
slaughterer's picture

Notice how they are slamming AAPL during Potter's lunch break.  

Fri, 10/26/2012 - 12:11 | 2921840 Yen Cross
Yen Cross's picture

These CNBC pinhead weenies blaming FX for lower corporate profits make me laugh. If the excange rate ran the other way, they would be talking about how fantastic sales were. If a company like AAPL can't hire a decent FX trader(s) to hedge their flows, they deserve to go straight down the shitter!

Fri, 10/26/2012 - 12:12 | 2921845 slaughterer
slaughterer's picture

I thought Braeburn was hedging AAPL FX.  

Fri, 10/26/2012 - 12:15 | 2921850 Yen Cross
Yen Cross's picture

 No idea.

Fri, 10/26/2012 - 12:12 | 2921842 slaughterer
slaughterer's picture

OT: Anyone know what company is supposed to take over NFLX as rumored today?

Fri, 10/26/2012 - 12:19 | 2921857 HaroldWang
HaroldWang's picture

They're all piling into much safer stocks like AMZN - can't you see that?

Fri, 10/26/2012 - 12:24 | 2921861 Temporis
Temporis's picture

The end is near!!! 12/21/12!!!

Hurricanes, Earthquakes, Volcanoes, and now AAPL.

The prophecy is true... DOOM!!!!!!!!! *Slashes wrists*

Fri, 10/26/2012 - 12:21 | 2921866 Mr Bluesman
Mr Bluesman's picture

AAPL's big problem is that their new product is fashion over utility. Having just swapped to Android (Sony Xperia T), the only thing that is not an improvement is the physical feel of the product. The Battery,  operation, compatability and file handling procedure are far superior. It's also probably tougher than the Apple (gorilla glass and polycarbonate shell), and radically cheaper in the uK market.

AAPL will now start to find a more realistic value, and their brand will sink back to 'one of many' kind, rather than the obsessives' must have item.

Fri, 10/26/2012 - 12:26 | 2921884 tawse57
tawse57's picture

Apple's big problem is that it appears a significant number of its hardcore fanboys and fangirls have to sell their 6 month old ipads in order to be able to buy the new one.


Fri, 10/26/2012 - 12:30 | 2921893 ParkAveFlasher
ParkAveFlasher's picture

Apple lost its vision, when it lost Steve Jobs.  It no longer sees things through the eyes of its target consumers.

Fri, 10/26/2012 - 14:02 | 2922209 seek
seek's picture

AAPL's biggest problem is that it's selling into a global economy that's undergoing a fiat-fueled implosion of a magnitude never seen in the history of man.

Fri, 10/26/2012 - 19:44 | 2922997 monkeyshine
monkeyshine's picture

That's not really a problem for AAPL since they sucked up a cash hoard of about $120 billion thanks to the fiat-fueled explosion.  The stock price may fall but the company can weather the storm better than nearly all others.

Fri, 10/26/2012 - 12:24 | 2921874 Bob
Bob's picture

On the upside, looks like AAPL is rolling out some competition for little Pandora (P) in the near future:


Fri, 10/26/2012 - 12:24 | 2921876 tawse57
tawse57's picture

Good article Tyler.

I especially like the In english this looks like this: - you should do more of these in your articles for those of us who didn't go to school with Gordon Gekko.

Fri, 10/26/2012 - 12:43 | 2921916 moriarty
moriarty's picture

Agreed yes please

Fri, 10/26/2012 - 12:24 | 2921877 Miss Expectations
Miss Expectations's picture

Dizzy Up the Algo.

Fri, 10/26/2012 - 13:31 | 2922094 UGrev
UGrev's picture


Fri, 10/26/2012 - 13:47 | 2922155 dirtbagger
dirtbagger's picture

Where is Reggie's post when you need it?

Fri, 10/26/2012 - 18:11 | 2922802 blunderdog
blunderdog's picture


Fri, 10/26/2012 - 13:55 | 2922183 rajc
rajc's picture

back to the green ... i must... do it..for the good ... of economy....

Fri, 10/26/2012 - 15:05 | 2922363 mdtrader
mdtrader's picture

White iPad minis are sold out already. The kids are going to love these things. The iPad mini could be huge for Apple as it bring tablets to the masses. Anybody still want a plastic Nexus or Kindle fire. I think not!

Sat, 10/27/2012 - 14:40 | 2924098 Sheriff Douchen...
Sheriff Douchenik from AZ's picture

Sold out? Of how many? What exactly does sold out mean? Yes, I want to be the first to get a revolutionary smaller ipad with yesterdays screen and processor also. If it's in dorky white so people know it's Apple even better.

Sat, 10/27/2012 - 10:38 | 2923733 Wave-Tech
Wave-Tech's picture

Both APPLE and the DOW threaten major cyclical tops.  Our algo's moved short AAPL over the near-term.


Sat, 10/27/2012 - 11:06 | 2923762 fuu
fuu's picture

Is there a way to get you to die in a fire algorithmically?

Sat, 10/27/2012 - 14:38 | 2924095 Sheriff Douchen...
Sheriff Douchenik from AZ's picture

When your #1 credo is "fleece your customers, everyday, all day...and if that doesn't work sue someone"... gotta think it's gonna be hard to get to a trillion as the analysts are telling me.

Wed, 12/19/2012 - 19:23 | 3080727 nahshal
nahshal's picture

Any reason the relative strength one was higher from 2003 to 2007 whereas worse before 1995? each area unit rising markets. cable harnesses

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