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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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Wed, 08/24/2011 - 22:45 | 1597958 the mad hatter
the mad hatter's picture

fudiciary duty is a dirty word on wall street

Wed, 08/24/2011 - 23:09 | 1598018 markmotive
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.

http://seekingalpha.com/article/289505-comparing-2-bubbles-gold-vs-nasdaq

 

 

Wed, 08/24/2011 - 22:46 | 1597961 mfoste1
mfoste1's picture

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

Thu, 08/25/2011 - 01:48 | 1598301 TruthInSunshine
TruthInSunshine's picture

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

http://krugman.blogs.nytimes.com/2011/08/24/coalmines-and-aliens/

 

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.

Thu, 08/25/2011 - 09:44 | 1599100 Panafrican Funk...
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.  

Wed, 08/24/2011 - 22:49 | 1597970 disabledvet
disabledvet's picture

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

Wed, 08/24/2011 - 22:49 | 1597971 kito
kito's picture

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

http://www.google.com/trends/hottrends

Wed, 08/24/2011 - 22:51 | 1597974 Pay Day Today
Pay Day Today's picture

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

Wed, 08/24/2011 - 22:55 | 1597985 mfoste1
mfoste1's picture

I would really like to see a Goldman contrarian strategy backtested over the past 2 years.....no doubt it would have been extremely profitable.

Wed, 08/24/2011 - 23:01 | 1598008 kito
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.

Thu, 08/25/2011 - 02:23 | 1598337 NewThor
NewThor's picture

I think Lloyd is getting shorter.

Wed, 08/24/2011 - 22:51 | 1597975 Hi Ho Silver
Hi Ho Silver's picture

pimpin ain't easy bitchez!

Thu, 08/25/2011 - 02:21 | 1598334 NewThor
NewThor's picture

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

I recommend the Ladies of Bloomberg TV.

Wed, 08/24/2011 - 22:52 | 1597977 Aguadulce
Aguadulce's picture

iLost

Thu, 08/25/2011 - 00:23 | 1598146 wandstrasse
wandstrasse's picture

follow the regarding market movements via putcast on your iPut

Wed, 08/24/2011 - 22:52 | 1597978 treemagnet
treemagnet's picture

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

Wed, 08/24/2011 - 22:55 | 1597984 IMA5U
IMA5U's picture

hillarious

goldman says sell apple puts

 

because they were buying!

Wed, 08/24/2011 - 22:57 | 1597993 mfoste1
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....

Wed, 08/24/2011 - 22:55 | 1597987 Placerville
Placerville's picture

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

Wed, 08/24/2011 - 22:57 | 1597996 Seasmoke
Seasmoke's picture

God sure does have a sense of humor

Wed, 08/24/2011 - 23:02 | 1598009 Rodent Freikorps
Rodent Freikorps's picture

Anyone notice the Washington monument cracked yesterday?

How's that for symbolism?

Thu, 08/25/2011 - 01:21 | 1598261 Oh regional Indian
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...

Vivek

http://aadivaahan.wordpress.com/2011/08/24/precursor-03-bottom-falling-out-still-still-and-a-gander/

Thu, 08/25/2011 - 01:56 | 1598310 Rodent Freikorps
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.

Thu, 08/25/2011 - 02:09 | 1598323 Oh regional Indian
Oh regional Indian's picture

hah, funny visual.

Vivek

Thu, 08/25/2011 - 01:40 | 1598283 slewie the pi-rat
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!

Wed, 08/24/2011 - 23:06 | 1598015 Daily Bail
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.

http://dailybail.com/home/nassim-taleb-reappears-as-an-industry-wall-str...

 

 

Wed, 08/24/2011 - 23:16 | 1598044 Id fight Gandhi
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.

Wed, 08/24/2011 - 23:27 | 1598059 Daily Bail
Daily Bail's picture

Define dog shit...

Wed, 08/24/2011 - 23:33 | 1598069 chump666
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...

Thu, 08/25/2011 - 00:50 | 1598199 Reese Bobby
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...

 

Thu, 08/25/2011 - 08:27 | 1598639 Hedgetard55
Hedgetard55's picture

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

Wed, 08/24/2011 - 23:09 | 1598017 Caviar Emptor
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!!

Wed, 08/24/2011 - 23:11 | 1598024 theotheri
theotheri's picture

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

Wed, 08/24/2011 - 23:21 | 1598050 Rodent Freikorps
Rodent Freikorps's picture

Define "remotely"

Wed, 08/24/2011 - 23:31 | 1598064 kiss my dopamine
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.

Thu, 08/25/2011 - 00:52 | 1598202 Reese Bobby
Reese Bobby's picture

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

Thu, 08/25/2011 - 02:25 | 1598340 NewThor
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.

 

Wed, 08/24/2011 - 23:30 | 1598028 chump666
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.

Wed, 08/24/2011 - 23:35 | 1598075 Trimmed Hedge
Trimmed Hedge's picture

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

Thu, 08/25/2011 - 00:07 | 1598118 chump666
chump666's picture

praise the lord you don't fill orders.

Thu, 08/25/2011 - 04:42 | 1598426 ZeroPower
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.

Thu, 08/25/2011 - 08:05 | 1598596 prophet
prophet's picture

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

Thu, 08/25/2011 - 20:00 | 1602149 Trimmed Hedge
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.

Wed, 08/24/2011 - 23:16 | 1598043 Caviar Emptor
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! 

Wed, 08/24/2011 - 23:27 | 1598058 Rodent Freikorps
Rodent Freikorps's picture

"Hope clouds observation." 

Reverend Mother Gaius Helen Mohiam

Wed, 08/24/2011 - 23:26 | 1598056 augie
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? 

Wed, 08/24/2011 - 23:49 | 1598081 alien-IQ
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. http://twitter.com/#!/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)

Wed, 08/24/2011 - 23:54 | 1598101 Caviar Emptor
Caviar Emptor's picture

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

Thu, 08/25/2011 - 00:13 | 1598130 Trimmed Hedge
Trimmed Hedge's picture

iMeltdown

Thu, 08/25/2011 - 00:55 | 1598207 Reese Bobby
Reese Bobby's picture

More hookers!  STAT!

Thu, 08/25/2011 - 01:09 | 1598237 anonnn
anonnn's picture

Perhaps Econ 101 is utterly useless to evaluate "economic" situations. In similar fashion, entire Econ B.A., Masters and PHD programs are only ridiculous pretenses undemonstrated workability.

Oh, heresy you say? Argue with Albert Einstein, who wrote:

"The discovery of general laws in the field of economics is made difficult by the circumstance that observed economic phenomena are often affected by many factors which are very hard to evaluate separately.

" In addition, the experience which has accumulated since the beginning of the so-called civilized period of human history has—as is well known—been largely influenced and limited by causes which are by no means exclusively economic in nature.

"For example, most of the major states of history owed their existence to conquest. The conquering peoples established themselves, legally and economically, as the privileged class of the conquered country. They seized for themselves a monopoly of the land ownership and appointed a priesthood from among their own ranks. The priests, in control of education, made the class division of society into a permanent institution and created a system of values by which the people were thenceforth, to a large extent unconsciously, guided in their social behavior. "

The whole essay is found at 

http://monthlyreview.org/2009/05/01/why-socialism

P.S. Eonomics as taught in Anglo-America is mostly used as justification for hidden agendas, easily including brilliant, if antisocial and nefarious, clever schemes. 

Thu, 08/25/2011 - 03:16 | 1598392 A Man without Q...
A Man without Qualities's picture

"Economics as taught in Anglo-America is mostly used as justification for hidden agendas"

The most obvious being Keynesianism has been distorted into something to provide an ever-available excuse for politicians to spend money to buy votes...

Wed, 08/24/2011 - 23:43 | 1598087 The Deleuzian
The Deleuzian's picture

If not, the US Gov. will buy 5,000,000 Ipods and dump them into the ocean, Presto!! Problem solved

What? It's all free money!  Who gives a %#!)?}....

DeBeers????

Thu, 08/25/2011 - 02:52 | 1598375 NewThor
NewThor's picture

Ijunkshot

Thu, 08/25/2011 - 00:00 | 1598111 Caviar Emptor
Caviar Emptor's picture

Look, this isn't "economic stagnation". We're sensibly waiting for the near future when robots will be doing most of the work. We're just saving our energy for the greater amount of leisure time that will ensue. That's not stagnation, don't be radicchio. 

Thu, 08/25/2011 - 00:27 | 1598137 SAME AS IT EVER WAS
SAME AS IT EVER WAS's picture

For one to be a conman or thief, maybe a bank robber-at least society knows what they are dealing with. For an admired hallmark American investment bank to be ruthless pirates with the peoples capitol and trust whlie hiding is sheeps clothing is a f'n disgrace. To do my part in ridding America and the world of these greedy, decieving, lyeing bastards i will donate an ipad2, and iphone5(when it comes out) to any group of vigilantes willing to hunt these cocksuckers down-take every thing own(stolen) and hang them in the "public square"(how about MSG!)

BTW-Thank you Steve Jobs for showing the world how you make a phone(-1 for no flash support), you are are a true innovator!

Thu, 08/25/2011 - 00:25 | 1598151 ml8ml8
ml8ml8's picture

That's an even better recommendation to follow tomorrow. More premium. Yum.  Might work well in a pair trade with QQQs.

Thu, 08/25/2011 - 00:30 | 1598153 HungrySeagull
HungrySeagull's picture

What goes up must come down.

 

With Jobs gone.... it matters not what anyone says.

 

Never you mind Gold, It's just raising steam for another run at the mountain.

Thu, 08/25/2011 - 00:38 | 1598171 Sequitur
Sequitur's picture

I'm not one for glib or racist comments, or this "bitchez" nonsense. But seeing how Goldman has ripped off its clients to boost its own proprietary trading, I say to all of you:

Fuck Goldman.

Thu, 08/25/2011 - 00:41 | 1598177 ComeAndTakeIt
ComeAndTakeIt's picture

I would not be surprised if an eight foot tall, goat-headed beast from the underworld has an office on the top floor at GS...Blankfein probably has meetings with it every morning, where it rapes him and then gives him orders.

Thu, 08/25/2011 - 01:00 | 1598216 Reese Bobby
Reese Bobby's picture

Well done.  Seems likely...

Thu, 08/25/2011 - 00:58 | 1598214 Careless Whisper
Careless Whisper's picture

 

 

...a rather unpleasant 30% loss in a few short hours.

Goldman took the other side of that trade. They made 30%.  Don't you get it ???

 

Thu, 08/25/2011 - 01:02 | 1598221 Reese Bobby
Reese Bobby's picture

Yes Captain obvious, we ALL get it.

Thu, 08/25/2011 - 00:59 | 1598215 Dingleberry
Dingleberry's picture

Those fuckers at Goldman are probably secretly on the other side of their recommendation.  That's their M.O.

Thu, 08/25/2011 - 01:16 | 1598250 Dr. Hannibal Lecter
Dr. Hannibal Lecter's picture

putz bitchez!  squid: 1  sheep:  0

Thu, 08/25/2011 - 01:27 | 1598272 YesWeKahn
YesWeKahn's picture

They forgot to call Jobs's doctor before this.

Thu, 08/25/2011 - 02:07 | 1598311 slewie the pi-rat
slewie the pi-rat's picture

naked short

for the premium, i'm sure, and the BEP is at a stock price of 289$ if we hold till expiration.  so, yeah, this is designed to produce some income.

if they put it out late, maybe their clients just looked at it and didn't trade it, yet.  if tyler is right abt tomorrow morning, they can sell it, then, for 30% more than the squid put the flag up for, today.  with a break-even point of 286$ b4 s&h.

good shit, maynard!

i'm not sure what "initiation date" means.  if it means they are advising clients that they will be putting this trade on their managed accounts, then, yeah, the squid didn't lose money trading, today, and the clients did.  other than that, maybe the "date" is designed to capture premium based on monthly past performance of premium decay, or some such "hook"

but steve jobs retiring today?  who coulda known?

Thu, 08/25/2011 - 04:22 | 1598413 Catullus
Catullus's picture

But when I actually embarked upon a line-by-line analysis, my experience was strangely like the one John Stuart Mill describes in his Autobiography regarding his analysis of Sir William Hamilton: “As I advanced in my task, the damage to Sir W. Hamilton’s reputation became greater than I at first expected, through the almost incredible multitude of inconsistencies which showed themselves on comparing different passages with one another.” 9 So I have found in Keynes’s General Theory an incredible number of fallacies, inconsistencies, vaguenesses, shifting definitions and usages of words, and plain errors of fact. My desire for thoroughness in pointing these out has carried the length of this book much beyond what I originally intended.
There has, however, I venture to think, been a certain compensation for the length of this analysis. The results are not merely negative. They do not merely prove that Keynes’s main contentions were wrong. For in dealing with the Keynesian fallacies we are obliged not only to scrutinize very closely his own arguments, but the “classical” or “orthodox” doctrines that he was denying. And in doing this, we shall often find that some of these “orthodox” doctrines have been only dimly understood, even by many of their proponents. In other cases we shall find errors or gaps in the usual statement of some of the “orthodox” doctrines themselves.

--Henry Hazlitt. "The Failure of the New Economics"

http://mises.org/resources/3655

Available at mises.org free on iBooks. A 500 page line-by-line refutation of Keynes written in 1959. There's never been a response by Keynesians and the "9 scientific studies" are as those with actual Noble Prizes in economics describe as "scientistic". But Hazlitt doesn't have a degree in economics, so it should be easy for Roubini to respond to the entire book as "juvenile". Facts only matter to the guy when he's trading on insider information.

Thu, 08/25/2011 - 07:40 | 1598548 Mentaliusanything
Mentaliusanything's picture

I know its not economically relevent, but during the last Depression - Apple selling kept many families from starving.

Times change but the fruit remains the same. Sell the damned thing to anyone you can find.

Pearls to pigs really

Thu, 08/25/2011 - 08:10 | 1598607 prophet
prophet's picture

unlimited downside - um, well, okay

most groundbreaking - hardly

 

Thu, 08/25/2011 - 08:19 | 1598624 Downtoolong
Downtoolong's picture

It would all probably make perfect sense if we knew who they had in mind to take the other side of the trade.

 

Thu, 08/25/2011 - 09:31 | 1599011 AnarchoCapitalist
AnarchoCapitalist's picture

There is not unlimited downside when you sell Puts. Was it a bad trade? Yes.  Just sayin'.

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