Our COO on First Business talking AAPL

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What Effect Will AAPL have on the Volatility Indexes

With all of the AAPL excitement over AAPL earnings, I thought I would skip the discussion on the price action of AAPL earnings on the SPX and the NDX.  I am even going to skip the discussion on the affect of AAPL earnings on VXAPL.  Instead I thought it would be interesting to discuss the ramification of AAPL earnings on the major volatility indexes themselves.

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The bizarre movement in AAPL

MSFT generated a great earnings report today.  Not the growth of AAPL mind you but pretty darn good.  I like to think when I work, I use MSFT products and when I play I use AAPL productS so there is plenty of room for both companies.  I made a crack in our Pro Chat Room today that if AAPL, MSFT and INTC could ever be up on the same day the market will really fly.  It just never seems to work out that way as INTC is down slightly today and AAPL is well, getting shellacked.  So let’s talk about AAPL.

As of around 338 ET the AAPL VIX, VXAPL was down on the day:

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Do Option Values Really Increase Into Earnings?

Heading into earnings season, I thought it might be interesting to talk about how options work into earnings.  In fact, one of the most misunderstood facets of options trading is earnings plays.  There is a major misconception of how options behave into earnings.  Most traders see a chart like this in RIMM and think the following:


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AAPL Options Implied Volatility in the Toilet

It is somewhat common knowledge that I continue to be a seller of option premiums right now.  However, that doesn’t mean that traders should be selling all option premiums.  There are a few tech names where the implied volatilities have been crushed to levels that we have not seen in some time.  Take AAPL for instance:  30 day option implied volatility is at two year lows:


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RIMM skew doing some funny things

Today was a day on Wall Street that was well, strange.  There was a nice little rally in the NASDAQ as it teetered near even most of the day and ended with a little move up.  For the most part the other indexes were lower including the VIX, as there was little good news to really lift things.  I think, at this point, the markets are at the end of cheap credit.  Negative interest rates for TIPS anyone?  That is not the kind of thing markets want to see.  There feels like there is some serious confusion as to what money managers will put money into.  Does anyone really want

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Netflix is streaming to a TV near you

The 4th quarter of 2011 is now viewed as the quarter of "the big growth momentum earnings wreck syndrome".   The big names like AAPL, NFLX and GMCR took it on the chin. So did much of the market as I recall, but I digress.   At least for the first two names for this earnings cycle that is not the case in the sunny land of 2012 (no problems fixed and the credit you want).   I am going to focus on NFLX for now, because I think the reason for the move is much different than AAPL’s, and there is a more interesting trade in there.

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Option Pit's Research on AAPL as Seen on Mad Money

There has been a bit of confusion as to what exactly what the reserach Jim Cramer quoted Mark Sebastian on last night meant (watch the Video here).  Here is the research that was used along with a slightly more indepth description.  It should clear up any confusion.  As a follow up,  you can catch our live webinar on using options to trade stock earnings on Feb 15th.  Register here.

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