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Tuesday, October 11, 2011

AAPL trading dynamic

I have been consistently highlighting AAPL's trading dynamic, with the low end being Steve Job's resignation and the 90SMA (which also corresponds to a very low multiple valuation).  Now it is testing the 400 range.

Given its underlining strength, low multiple base and the fact that I now I can discount ECRI's recession call, AAPL looks to want to test the 420 area.

I should note how I would normally been playing AAPL, as this is one of the opportunities lost.  Near 370 to 350 I would have been purchasing 370 Jan call options.  Purchasing Two option in the 360s and two in the 350s. As AAPL rallied off the 350, I would have unloaded the one purchased in the 350s. Maintaining the two purchased at 360, and any other position I had maintained going into its decline (although the options would have been re-posititioned to a 370 strike). On Friday's weakness, at 370, I would have added one position, leaving me with a total of 3 options (and what I maintained).  With yesterday's move, I would have sold off the 2 options, and today I would have sold off the remaining third option.  Leaving me with a minimal position I held onto into its decline. (I would reposition the options again, to a 390 strike here.)  I would be holding on to this position until the 420 level, and wait for a re-entery into AAPL.

(In hind-sight, this action took place within a 3-4 day period, but earlier this year, AAPL's weak trading took place over a multi-month period. My trades are not time dependent, they are price dependent. Hence my inability to take on these trades at the moment.)

Basically, going heavy near 360, and being light at 400.  But since there is now a greater possibility of pushing higher, I would maintain a light position, but not an added position. (I would add a 390 Jan call option to the position if 390 is seen from the potential 400 level resistance.) 

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