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AAPL Options 'Complacency' Near 2009 Record Highs

Tyler Durden's picture


AAPL is making headlines once again with its market-moving impact, its law-of-large-numbers-crushing daily moves, and its seeming cult of indifference among retail and hedge funds alike. As the stock price hits new all-time highs, we note that options prices are also breaking records with the complacency regarding any downside risk near post-2009 highs. The last three times we have been up at these levels has seen significant reversions in price: Nov 2010 -7.3% in 6 days, -12.68% in late July 2011, and a late Feb 2012 drop of 5.83% in 4 days.



Options-implied skewness measures the shift in the normal distribution that is required to fit with options prices. The skew 'shift' is the move left and right that increases or reduces the expectations of downside and upside stock movements. In the case of AAPL, its model-implied skewness has only been more skewed to 'no-downside' once since 2009. The higher the point on the chart above, the more complacent the options market has become and the more fuel for a sell-off has been stoked into the wall of worry - small doors, large crowds.


Chart: Bloomberg


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Mon, 08/20/2012 - 13:27 | Link to Comment diogeneslaertius
diogeneslaertius's picture

cult of indifference

boy you said it

Mon, 08/20/2012 - 13:35 | Link to Comment no taste
no taste's picture

Simple Good Works are things we all can do.

Ladies cycling for awareness.

Mon, 08/20/2012 - 13:28 | Link to Comment slaughterer
slaughterer's picture

The speculative frenzy in AAPL W calls means the stock will reverse hard this week.  I would say Tuesday afternoon is when to enter the short side of AAPL, hopefully around 670-675.  AAPL in 2012 is trading much like MSFT in 1999.  Compare their charts for the roadmap ahead on AAPL.  

Mon, 08/20/2012 - 13:30 | Link to Comment fonzannoon
fonzannoon's picture

I was in the camp that apple buying was the easiest way to goose the index higher. Am I to believe there are actually fundamental and techinical things at work?

Mon, 08/20/2012 - 13:47 | Link to Comment Dr. Engali
Dr. Engali's picture

Sooner or later you run out of buyers and somebody wants to scoot out the door. Just wait for the first big roach to scramble. I don't know when it will happen but it should be fun to watch. I personally don't want anything to do with this trade. It's too easy to get run over on either side.

Mon, 08/20/2012 - 13:48 | Link to Comment Meesohaawnee
Meesohaawnee's picture

in todays fraud market i wouldnt be at all shocked if the fed were buyin AAPL shares.. would anything shock ya now? not me

Mon, 08/20/2012 - 15:40 | Link to Comment DavidC
DavidC's picture

I do think it would be funny if it got $666 and turned though!


Mon, 08/20/2012 - 13:37 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

We'll need a big drop so Tyler can post his hilarious 'CRAAPL' headline again

Mon, 08/20/2012 - 13:51 | Link to Comment Dr. Engali
Dr. Engali's picture

That's been my thesis. Microsoft used to be cool like Apple. Everbody had to own it, then one day it was no longer cool and the stock was cut in half. It's been dead money ever since for the buy and hold crowd. It has been a good tradable stock though.

Mon, 08/20/2012 - 13:35 | Link to Comment Hype Alert
Hype Alert's picture

It's all good.  Maybe with everyone's debt foregiveness, you get a free lunch AND iPad?

Mon, 08/20/2012 - 13:36 | Link to Comment The Axe
The Axe's picture

volume in overall market BAD   volume in APPL GOOD     leave it alone!!!!

Mon, 08/20/2012 - 13:40 | Link to Comment slaughterer
slaughterer's picture

volume in AAPL common stock GOOD

volume in AAPL options INSANE

==>  TROUBLE  

Mon, 08/20/2012 - 14:23 | Link to Comment kaa1016
kaa1016's picture

As an option trader, the moves in this stock have been an option traders dream, and by far, my most profitable name, long and short. Mostly long obviously. It looks like they want to run the stock to $700 and as long as overall market volume and vol stay in check, I think it will get there. It's a repeat of Feb/Mar when it went parabolic on its way from $450 to $600. Do I think this stock deserves this valuation? It doesn't matter what I think. What matters is the price action. Watch GOOG pushing $700 as well.

Mon, 08/20/2012 - 13:42 | Link to Comment slaughterer
slaughterer's picture

OT: still shorting WTI in the 95s.  Really do not think WTI is going to hold above 95 much longer.   Easy $$$

Mon, 08/20/2012 - 13:44 | Link to Comment monopoly
monopoly's picture

I do drink the Kool aid and have for many years. Avid MAC fan. But I also have 1/2 a brain and never touch the stock, up or down. Just leave it alone. In a world all by itself. And yes, volume again dismal. Future Wall Street layoffs, guaranteed. My question is when do the CEOs of these broken corrupt firms and banks get laid off? Of course never. And raise that year end stipend. AmeriKa!

Mon, 08/20/2012 - 13:45 | Link to Comment alien-IQ
alien-IQ's picture

I was just looking at 625 and 650 puts...but I came to the conclusion that I'm just not that brave or careless with my money.

standing down.

Mon, 08/20/2012 - 13:54 | Link to Comment slaughterer
slaughterer's picture

I will execute the AAPL short tomorrow.  Will post my entry and exit as they are made.   It is a good pain trade.   

Mon, 08/20/2012 - 13:47 | Link to Comment ZippyBananaPants
ZippyBananaPants's picture

Oh Boy, let him speak freely and he puts his foot in his mouth big time.  

When you run for president your life should be an open book.  oopsie, uh, uh, on some things, uh, uh,

What an asshat!! 

Mon, 08/20/2012 - 14:14 | Link to Comment bagehot99
bagehot99's picture

He says 'uh' an average of 200 times per sentence when off-prompter. And they called Bush stupid. This amateur would be a laughing stock if the media weren't giving his balls a collective tongue bath.

Mon, 08/20/2012 - 13:59 | Link to Comment Cone of Uncertainty
Cone of Uncertainty's picture

Hey, anyone seen Reggie's face since it got ripped off.

Reggies face, you in here, where are you...?

Come out and playyyyy!


Ghost of Steve Jobbs

Mon, 08/20/2012 - 14:04 | Link to Comment slaughterer
slaughterer's picture

If my face gets ripped off, I will use Reggie's.  

Mon, 08/20/2012 - 14:12 | Link to Comment Flaming Ferrari
Flaming Ferrari's picture

It's going to $1000. No point fighting it. Hedgies along can jack it way higher. Better things out there to short.

Mon, 08/20/2012 - 14:13 | Link to Comment Remington IV
Remington IV's picture

Apathy ... the disease no one cares about

Mon, 08/20/2012 - 14:25 | Link to Comment vbone
vbone's picture

aapl shares are a necessity to human life, like water bros! 

Mon, 08/20/2012 - 14:46 | Link to Comment Doublescythe
Doublescythe's picture

Good thing I hedged :)

Mon, 08/20/2012 - 15:13 | Link to Comment sarnuk
sarnuk's picture

Can someone go over the way this chart is calculated? What are the thin lines and what is the darker shaded line?

Mon, 08/20/2012 - 20:50 | Link to Comment Cthonic
Cthonic's picture

Smells like YHOO circa '99

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