Heading into earings tonight, the market was looking for about a 5.50-6.00 move on AAPL earings tonight. We know its somewhere in that range based on how the weekly strangles were priced at the close on earnings monday vs the prior monday. The math is pretty simple with out all the extra mumbo jumbo.
Earnings Monday (today)
AAPL just posted a big number and the stock is up $2 after rallying a couple of dollars today and many dollars for the week. I guess it is the big number that you have to print that counts. AMZN posted a giant revenue number last week but so far has been able to avoid accountability for actually ma
At any given time, over 50% of all options are overpriced. This is why most traders like selling premium. At the same time another 20-30 are typically fairly priced with another 20-30% being underpriced. This means that while it is likely that an option is overpriced, its not always the case. Take AAPL for instance. Take a look at how the underlying has been moving relative to the price of its overall options:
FB announced earnings tonight. While we saw some decent fire works out of AAPL, we did not see the same thing out of FB. The market was pricing in a move of about 7%. As I write this the stock has barely budged. The short strangle/straddle is goign to pay out extremely tomorrow, Shorts will make about 4-5 hundred dollars a spread. The payout is pretty clear below:
Look for the Option Pit Store to open soon!
The market did not like CAT or MSFT earnings today. It actually felt good to know stocks could sell off on bad news instead of the heroin induced QE state of suspended animation that has taken over equity prices for the last couple of years. I don’t think the MSFT earnings were 10% bad but the market did not agree with me. We are not talking MSFT, we will talk AAPL.
The news is out Apple is going to have the I-Phone 6 AND the I-Phone 6 PLUS!!! Plus APPLE PAY and the I-Watch. Based on what the stock did, the market acted to the AAPL conference much like McKayla Maroney would to a Silver Medal. With that the VXAPL got smoked. Even more so, the VIX options expiring this week and next week took it in the chin. That being said, it appears the market is still holding out hope for some more movement here is a chart of VXAPL:
The big news right now is that AAPL did not announce any new hardware. There are hints and the developers like the new software, but the bread and butter of hardware is still not announced yet. That makes this conference a little different in that AAPL has held up pretty well after the big rally going forward. How it reacts next week is anyone’s guess.
As I write this the AAPL WWDC is going full tilt and the stock has not been able to hold up for most of the day. Granted it had a near $40 run up last week, $606 to $642, so a pullback is not out of the cards. That run also helped push the SPX to record highs on not the greatest news in the world. Part of that run is helping to damp down the volatility a bit in the big indexes of which AAPL is a part.