Goldman's Latest Trade Recommendation: Sell Apple Puts - Loss: 30% In One Day

Tyler Durden's picture

That's right: nothing like a little virtually unlimited downside just head of the most groundbreaking (if somewhat priced in) announcement in Apple history. We can only hope this recommendation to sell Apple $300 January Puts, with an initiation date of, well today, was purely a function of impeccably bad timing, because if Apple opens tomorrow at the futures closing price of $357, these will be worth $14.21: a rather unpleasant 30% loss in a few short hours.

From Goldman:

Sell Puts on AAPL ahead of September iPhone launch

Sell AAPL January 2012 $300 puts, collect $11.05 (3%, stock $373.60) ahead of earnings and strong product pipeline. GS Hardware analyst Bill Shope believes that Apple’s secular momentum in smartphones, tablets and mobile computing should remain  resilient, even if macroeconomic conditions deteriorate. He sees 28% upside to CL-Buy shares over the next 12-mths. AAPL shares have outperformed over the past month (down 11% vs S&P500 down 16%), and he expects them to continue to outshine other tech companies given the company’s differentiated product offering and market share gain opportunities.


With iPhone refresh in September, iPhone demand should remain strong into holidays despite macro pressures. Our analyst expects that the iPhone 5 introduction will occur in September, with an iPhone drawdown occurring prior to launch, and followed by a hyperseasonal December quarter. He forecasts 16.9 million units will be sold in the September quarter and 26.3 million units in the December quarter. He notes that recent press releases suggest that early orders for iPhone 5 appear strong, indicating that iPhone demand will remain robust in the back half of 2011, even with increasing macro pressures. 


Apple scores highly on our GS SUSTAIN framework, an ideal holding for uncertain times. Apple combines sector-leading returns on capital with a leading industry position – it ranks in the top decile on both measures in GS SUSTAIN’s analysis of the global Hardware sector. Apple’s sector-leading cash returns are likely sustainable due to its exposure to structural growth in its addressable markets (Smartphones, Tablets, etc.) and continued leadership in product development (as evidenced by its recent iCloud announcement). The company has been able to leverage its strong product development cycle and industrial positioning with solid management quality to generate first quartile return on capital (35%), forecasted from 2011-13E.


Sell puts to get exposure to AAPL closer to our analyst’s downside level. AAPL six month implied volatility of 38% is in its 98%-ile over a 1-yr period, and 12 points above realized. Normalized skew is also elevated in AAPL, at 3 standard deviations away from its 1-yr average. Earnings are not typically a large driver of Apple realized volatility (average +/-2.5% move over past 8 quarters). By selling the January 2012 $300 puts, investors collect $11.05, which essentially brings their entry point to $288.95, or 8% away from our analyst’s bear case scenario of $267 (-29% from today). Put sellers commit to buying stock at $300 if shares fall below this level by January expiration.

Nothing like a little skewed up/downside:

And while clients are selling puts to Goldman, Goldman is, logically, on the other side of the transaction.

h/t @cmr333

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the mad hatter's picture

fudiciary duty is a dirty word on wall street

markmotive's picture

Well, let's hope Goldman is right about gold.

BTW, if you think gold is a bubble you haven't seen anything yet. To reach NASDAQ bubble proportions, gold has to hit $3200/oz.



mfoste1's picture

(*sigh*) puts head in hands.....when will they stop?

TruthInSunshine's picture

Krugman is drunk and/or high, AGAIN (here's his latest tirade re gold):


Keynes then goes on to explain that the actual business of gold mining — in which basically useless ore is mined and refined at great cost, then sent to sit idle in the basements of central banks — is for all practical purposes identical to his coalmine idea.

Panafrican Funktron Robot's picture

I guess that's why women just hate....HATE....getting jewelry made from precious metals and stones, because clearly, they're worthless.

Krugman clearly needs a lady friend to help explain that women are intuitively aware of the value of precious metals and stones, and further, why it's extremely stupid to bet against a woman's intuition.  

disabledvet's picture

So given that the nasdaq is market cap weighted i guess i should go long that as well.

kito's picture

latest google trends have apple at the 1 and 2 spot. nope, nothing about golds big fall today....yawn

Pay Day Today's picture

Just do the opposite of what GS says from now on and you will make millions.

mfoste1's picture

I would really like to see a Goldman contrarian strategy backtested over the past 2 doubt it would have been extremely profitable.

kito's picture

its impossible. you will lose money on trading commissions when you are buying and selling the same thing 10 times a day.

NewThor's picture

I think Lloyd is getting shorter.

Hi Ho Silver's picture

pimpin ain't easy bitchez!

NewThor's picture

If you have to make out with hot max head room financial tv chicks,

I recommend the Ladies of Bloomberg TV.

wandstrasse's picture

follow the regarding market movements via putcast on your iPut

treemagnet's picture

Do as I say, not as I do......

IMA5U's picture


goldman says sell apple puts


because they were buying!

mfoste1's picture

They will continue these shenanigans because there is always new dumb money coming in to the markets that they can leach off of. That's how these cocksuckers make a living....

Placerville's picture

What they really mean is sell AAPL $300 Jan-12 PUTS (to us!)

Seasmoke's picture

God sure does have a sense of humor

Rodent Freikorps's picture

Anyone notice the Washington monument cracked yesterday?

How's that for symbolism?

Oh regional Indian's picture

Big sign eh Rodent? Like freemasonary's Ultimate Masonic symbol, tilted. Gee Dub must be spinning in his perfectly masonic grave.

I showed a picture of it on my blog yesterday. Quite a sight...


Rodent Freikorps's picture

Maybe it was him spinning that caused the quake.

I'd pay to see Founder Zombies rise and eat the brains of the current congress.

slewie the pi-rat's picture

yeah. people were kickin it around after the quake

maybe even on the E coast;  my daughter told me:  that's funny!  all they ever associate w/CA is earthquakes, and now this!

Daily Bail's picture

So, Apple goes goes back to where it opened Tuesday morning.  Considering it trades at a forward PE of 14, with $70 billion in cash, I don't think the stock will suffer too greatly on this news, especially given that Jobs will remain as Chairman of the Board, and an employee, which is pretty strange, as in how in Cupertino is he going to be a regular employee and not take over every meeting he attends.  

But this, this is f'ing news...

The Black Swan is back.  Nassim Taleb comes out of Bernanke-induced hiatus.



Id fight Gandhi's picture

I wouldnt go near apple with cook in place. Not after HP shake up. Apple was dog shit before jobs. Now it will pias away it's cash on stupid shit and the macro economy all downhill.

chump666's picture

Taleb is back?  Right, puts and mini shorts all the way, gonna time it with his return.

Need another Doomer...maybe Faber coming out in two days and saying how he is concerned that Asian markets aren't making new highs.  Somthing like that...

Reese Bobby's picture

Based on the shirt and jacket I'm betting he had white socks and sandals on.

But if you think the markets are acting healthy then you deserve everything that is about to happen to you; if you have two nickels and are investing...


Hedgetard55's picture

That British blond did not even listen to Taleb. What a twit.

Caviar Emptor's picture

Hey! Investors: did you see how we did that? Telling people the pea was under the 'Sell Apple puts' shell? When really it was under the 'Sell Apple calls' shell? haha! Well if you're quick and saw how we did that, now you can get rich quick by betting against our next recommendation: ...BUY Apple Puts!... Hurry hurry, lay your money on the line....if you snooze you lose...this is your lucky chance don't blow it!!! Do  it NOW!!

theotheri's picture

So much jealousy on this site. I bet not one of you is remotely qualified to work there.

kiss my dopamine's picture

You mean like switching to a government major at Dartmouth because a relation got me in and can't handle the econ course load. Yeah, I know 2 former classmates that are "qualified" to be working there.

Real world qualifications: Go to a small list of schools and know someone inside. Got me my job.

Reese Bobby's picture

Define "qualified."  Goldman is the new Jefferies dumb-ass.

NewThor's picture

I hear Jesus Christ is considered the least qualified person to work at Goldman Sachs.

Jimi Hendrix is 2nd least qualified. 

I came in 3rd.


chump666's picture

Goldman should look at the NASDAQ that got hammered on 'that' week of volatility - and it will be back once ranges all move lower after the QE3 already priced and sell on the fact.

JAn 2012 puts on $300?  Hold em.  Apple is going to sell hard.

Trimmed Hedge's picture

Can't really hold something that you've already sold....

chump666's picture

praise the lord you don't fill orders.

ZeroPower's picture

Holy shit youre dense - yes you can hold the options till maturity and pray theyre not excercised - but you take an immediate hit for selling them yesterday when today they'll open much higher.

prophet's picture

OOTM rarely if ever exercised  (btw  ----  selling AAPL puts ---- large and ITM for a few years awhile back was way fun)

Trimmed Hedge's picture

If I sell you something, say, OOTM AAPL puts, I no longer have them.

Therefore I cannot hold them, as I don't have them.

In fact, if I want them back, then I have to buy them back (at a higher, lower, or same price).

How can I buy something back if I already have them? Your "logic" makes no sense.

Caviar Emptor's picture

"What's good for Apple is good for America!" Well, China too. Maybe a bit more. 

But that's not the point: we need a catchy patriotic-sounding slogan that will put thieves masquerading as patriots into office! 

My trick: I call everyone with money "A Great American". Then I expect payback under the table. That's how to get elected and stay there! 

Rodent Freikorps's picture

"Hope clouds observation." 

Reverend Mother Gaius Helen Mohiam

augie's picture

something doesn't gel. Shouldn't have goldman been frontrunning this news? i mean don't these scoundrals all pray to the same heathen gods? 

alien-IQ's picture

OT...but well worth it: Nouriel Roubini seems to be on a drunken twitter rant. It's fuckin hilarious.

here's one of the Gems: "Patethic democracy of Twitter/Blogs: any ignoramus/wacko/hack without even Econ 101 feels entitled to spew pompous nonsense on Keynes & Econ"

And this one mentions ZH in no loving manner: "Pathetic cheap shot = to "creationist" mindset @zerohedge:If an Econ Ph.D. had done academic/statistic studies it would have been 9 out of 7"

This is just priceless. Here's the link to his twatting.!/Nouriel


EDIT: Ok...just catching up on the twatting now and I see it's ZH that's stirring this pot of madness. Quite funny. You guys are gonna lead NR to drinking cheap booze whie stumbling down 6th Avenue ranting about the evils of socialism and how money printing will save us all.


Good stuff. (but I hate twitter)

Caviar Emptor's picture

He used the word bozos. As a member of a distinguished clown family, I'm offended.