Notice carefully exactly how much AAPL "corrected" last July, when the general markets were going to hell in a handbasket:
139.142.147.218
From the close on June 30 until the bottom on Aug. 12, QQQQ lost 14.0%, trading from $37.74 to 32.47.
But AAPL lost only half that much during the same period, trading from $32.54 close on June 30 down to $30.37 at the close on Aug. 12, a drop of 6.7%.
And AAPL has only gotten stronger compared to QQQQ since then, so one would expect that AAPL's downside during a correction would be blunted.
That's exactly what has happened.
QQQQ closed at $39.99 on Dec. 30, and then the medium-term correction began. QQQQ traded down rapidly to close at $36.53 on Jan. 24, a decrease of 8.7%.
In contrast, AAPL closed at $64.80 on Dec. 30, and closed at $70.76 on Jan. 24----a gain of 9.2%.
139.142.147.218
139.142.147.218
You could go broke in a hurry shorting "corrections" like that, especially with a highly leveraged position like front-month puts, that require unusually great downside volatility out of any stock. And AAPL just doesn't have nearly enough downside volatility most of the time---the beta is 1.8, but that's mostly upside volatility.
Sentiment isn't on your side either. The put/call open interest ratio and the volume put/call ratio are both about middle of the road for AAPL---there is neither excessive bullish nor bearish sentiment on the stock. So, besides the other reasons, I see no options-related or sentiment-related support for a short position in the stock.
T |
