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...
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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...
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and VIX futures are having problems...
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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...