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Manipulation of Apple's Stock Price Evident in the Options Market?

I'm pretty sure Jtara has it right. This is mainly the effect of expiring options forcing trades to occur. Apple might have this effect more than others because of the huge number of traders who follow it and trade it. I and my friend (both small shareholders) have often speculated that you could time Apple's stock moves based on a few irrational things consistently said by analysts. But that is another discussion.

The vast number of options being sold for Apple might be skewing the stock's price because you have so many people taking interests in the stock at so many different prices, it might be impacting short term prices. But long term prices will be based on performance.

Speaking of performance though, what the heck is Apple going to do with that pile of cash? And when do they start sending it to people like me (i.e., their stock owners)? It is my company! I own you! (Well just a bit.) And I want my two dollars!
 
Some sort of Goldman-Sachsian shenanigans, perhaps insider manipulation, perhaps a market-analysizing AI. You never know these days, Wall St. is too corrupt and complex for a number of phenomena to have a simple explanation and the stock-market has become largely dissociated from the real economy.
 
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The overall market, not just AAPL has been seeing that sort of sell off in the last hour or so of trading on Fridays the past 8 weeks. Traders, Institutions, Hedge Funds, etc. are taking risk off the table going into the weekend with all the headline risk that is in the market at this current time...

Also, no one seems to have pointed out or complained about AAPL's sharp rise in the first 15 min of trading that day from $347 and change to $351 and change...

And then there's also the statistical phenomenon of reversion to the mean... The stock opened at 346.78, hit a high of 353.95, a mean of 350.36. The stock closed at 350.13...

jmcrutch said:
To whomever above is basically saying "this is how options markets work" you are ignoring that there is an effect on the "normal" workings of the regular market. AAPL shouldn't close every Friday at the specific numbers it's closing at, except for the options pricing. Personally, I'd like to see all options go away. Either buy the stock or don't.
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Please get educated about options before you go and make some ridiculous statement like the one above. I'm sure once you get a little understanding of their benefits you will change your mind... Here's a quick example none of which should be taken as investment advice and should be used for educational purposes only:

(prices are as of close 05/12/2011)

We both currently own 100 shares of AAPL and have a long term bullish outlook on the stock. However, we both currently think that the stock price will be short term bearish and decline over the next 30 or so days...

Your Position: 100 Shares at $346.57
Your Risk: $34657.00 or 100%

My position: 100 Shares at $346.57
1 July 345 Long Put at 12.75
1 June 345 Short Call at 10.30
My Risk: $402.00 or 1.16%

So far, which do you think is better? $34657.00 worth of risk or just $402.00 worth of risk. I know which one will let me sleep better at night...

We were both right and AAPL drops to 325 per share.

Your gain/loss: - $2157.00 or -6.2%

My gain/loss: -$2157.00 (Loss from stock) + $765.00 (Gain from Long Put) + $895.00 (Gain from Short Call) = -$497.00 or -1.4%

So while you have to wait for AAPL to make it all the way back to $346.57 a share to get back to even and start making profits, once AAPL hits $329.97, I'm back to making profits. Therefore, once you're back to even, I've got a gain of $1660.00.

Once again, I ask which do you think is better?
 
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For what it's worth, I've suspected something like this for quite some time. I own more than a few Apple shares and watch them very, very closely... My best guess is that if there's manipulation what's happening is that those traders are trying to provoke/capture larger than normal swings (both up and down) relative to earnings announcements.
 
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Most posters here are phenomenally ignorant about how the markets work and even basic finance. While it's frustrating that so many people in society have little to no grasp on finance, I'd expect that people should at least be aware of what they do not know and stop throwing out ridiculous statements.

I'm not going to jump into a topic I know literally nothing about and pass off my ravings as legitimate and informed discourse. The least people could do is get themselves a couple books on finance instead of saying "ban options!", "day traders are crooks", and "clear evidence of market manipulation!". I'm no Harvard educated quant, but c'mon guys.
 
JDMZed said:
We both currently own 100 shares of AAPL and have a long term bullish outlook on the stock. However, we both currently think that the stock price will be short term bearish and decline over the next 30 or so days...

Your Position: 100 Shares at $346.57
Your Risk: $34657.00 or 100%

My position: 100 Shares at $346.57
1 July 345 Long Put at 12.75
1 June 345 Short Call at 10.30
My Risk: $402.00 or 1.16%

So far, which do you think is better? $34657.00 worth of risk or just $402.00 worth of risk. I know which one will let me sleep better at night...
Click to expand...

Err, I would advise the esteemed readers of Macrumors not to make trades based on the advice of JDMZed ;)

The problem with this trade is that there isn't any scenario that you can make money. You have indeed limited your potential losses, but whats the point if there is no possibility of making a profit?

If the stock increases, your gains are wiped out by your losses on the short call. If the stock drops, your gains on the put are wiped out by losses on the stock, and your gain on the short call is limited to the initial 10.30 you received for selling it short.
 
I have two questions :

* Can't we say that Apple's stock options are highly risky?

* Aren't those stock options overpriced?
That is, the smallest mistake or trouble in/around Apple and it will drop strongly.
 
Reason077 said:
Err, I would advise the esteemed readers of Macrumors not to make trades based on the advice of JDMZed ;)
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You seem to think you're somehow special in this; in reality JDMZed gave an educational example, not investment "advice," and pointed this out himself/herself. Reading comprehension, folks.

Reason077 said:
The problem with this trade is that there isn't any scenario that you can make money. You have indeed limited your potential losses, but whats the point if there is no possibility of making a profit?
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Again, it was clearly stated and framed as an example of reducing risk using options, in order to argue against the uneducated notion that options need to be banned because those investors should "either buy the stock or don't." I'm sure everything you say here is absolutely no surprise to the original poster despite what you seem to expect.

You're drifting way off topic here, just in a slightly more knowledgeable way than the folks who think that rooms full of HFT computers control the economy in this dark age of woe. Anyway the point should be made clear: options are not the enemy. In fact options have been around for hundreds of years. In this case might there be foul play? I don't know; it's OK not to know, too. But this thread should focus more on the actual news item and not just the deposition of random facts about options.
 
(L) said:
You seem to think you're somehow special in this; in reality JDMZed gave an educational example, not investment "advice," and pointed this out himself/herself. Reading comprehension, folks.



Again, it was clearly stated and framed as an example of reducing risk using options, in order to argue against the uneducated notion that options need to be banned because those investors should "either buy the stock or don't." I'm sure everything you say here is absolutely no surprise to the original poster despite what you seem to expect.

You're drifting way off topic here, just in a slightly more knowledgeable way than the folks who think that rooms full of HFT computers control the economy in this dark age of woe. Anyway the point should be made clear: options are not the enemy. In fact options have been around for hundreds of years. In this case might there be foul play? I don't know; it's OK not to know, too. But this thread should focus more on the actual news item and not just the deposition of random facts about options.
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Your point understood. You are right about the nature of this topic, but I tend to agree more with Reason007. The thing is that on such markets it _is_ possible to make money but with a risk. To my understanding he just tried to warn potential "grasshoppers" to not put their necks where they shouldn't...
 
caspersoong said:
Apple and its tricks again. Good thing my family did not buy AAPL.
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Which tricks is Apple playing?

This article is about dirty tricks from traders. The only fault you can blame on Apple is that it created through its success a valuable shares that are worth gambling with. But those tricks are played on many other stocks too.

And I'm really sorry for you that your family didn't buy AAPL - they really lost out on some great opportunity in the stock market. Oh well, stock market is not for everyone.
 
jtara said:
This is pretty nonsensical. Fortune should know better. This is a natural phenomena of option pricing. Of COURSE the market is going to drive the stock to the price where the maximum number of options will expire worthless.

Traders (as opposed to those using options for legitimate hedging reasons) don't want to hold options to expiration. If a near-the-money call option is looking like it is going to expire with a value of, say, $1, then the holder of those options is going to sell them. Ultimately, they are going to be involved in a conversion, where the buyer exercises the call (acquiring the stock at the fixed, option price) and then immediately sells the stock. Of course this sale is going to help depress the stock price.

Expiring puts that are in the money are going to help force the stock price up.

The two opposing forces will try to force the stock price to the "max pain" price, which will depend of the overall balance of open calls/puts.

The only fix that I can think of is continuous expiration, rather than a fixed weekly expiration day. Wasn't aware that options went to weekly expiration, and assume that this was meant as a move toward continuous expiration which perhaps back-fired, because it now creates the phenomena weekly rather than monthly.

It's normal *trading* activity, not normal *hedging* activity that is going to force the price to max pain. Hedgers hold options to expiration. Traders don't. The extent to which max pain comes into play will in part be determined by how many options are held by traders as opposed to hedgers.
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It's not "normal trading activity" when it comes to stocks like aapl. The fact that you were unaware of weekly options in aapl and a few other stocks demonstrares that you really don't understand what's going on and instead are trotting out the same old tired excuse used by WS that it's just normal market forces at work. "Nothing to see here. Move along."
 
Reason077 said:
Err, I would advise the esteemed readers of Macrumors not to make trades based on the advice of JDMZed ;)

The problem with this trade is that there isn't any scenario that you can make money. You have indeed limited your potential losses, but whats the point if there is no possibility of making a profit?

If the stock increases, your gains are wiped out by your losses on the short call. If the stock drops, your gains on the put are wiped out by losses on the stock, and your gain on the short call is limited to the initial 10.30 you received for selling it short.
Click to expand...

As soon as I posted this I was expecting someone to make some sort of comment like this...

First, as I pointed out in my original post and as (L) helped to emphasize, this was an educational example to show how options can reduce risk.

You are correct in stating that if AAPL stock were to move to the upside there would be no potential for profit with the example I used. And yes, You are still losing money to the downside as well... However, you missed the point. Would you rather do nothing and lose $2157 or learn to protect your capital and only lose $497. You could also structure the trade differently to make money on the downside rather than lose money. That wasn't the point of the example. It was a basic example of risk management using options.

Also, you seem to be forgetting the fact that once you buy an option, you can sell it at any time. Therefore, after AAPL had it's theoretical downswing, and your opinion on the stock turned back to that of a Bullish view, you would sell back the Long Put for more than you paid for it, buy back the Short Call for less than you sold it for, now allowing for profits after AAPL rises past $329.97 rather than $346.57.

Once again, let me reemphasize that my example is not to be taken as investment advise and should only be used for educational purposes to demonstrate how options help to reduce risk.
 
BC2009 said:
Actually this sort of game only affects those who are doing the short-term investments and playing games with various stock derivatives like options and futures. This sort of fluctuation has no effect on the long term investor. Maybe you were referring to the guys buying the options and complaining about the price drop as the dirtbags. Sorry if I misread.
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Actually, unfortunately, that's not true. While fundamentals in the end will/should prevail, the constant pinning and other forms of manipulation by the big money players does create a "shell shock" condition, and act as a longterm drag on share value.
 
caspersoong said:
Apple and its tricks again. Good thing my family did not buy AAPL.
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Maybe once you're out of the house and on your own your family can pick up some aapl. Of course, by then, it will be well north of 500, but still should have plenty of room to run.
 
0815 said:
Which tricks is Apple playing?

This article is about dirty tricks from traders. The only fault you can blame on Apple is that it created through its success a valuable shares that are worth gambling with. But those tricks are played on many other stocks too.

And I'm really sorry for you that your family didn't buy AAPL - they really lost out on some great opportunity in the stock market. Oh well, stock market is not for everyone.
Click to expand...

You took the bait from a troll. Don't do that because they win when you do.:eek:
 
:confused:This is a bit over my head. Make's me want to learn what the heck is going on in Wall Street, but until then I won't pretend to know.
 
I wouldn't lump finances with the market. One is controlling money that you have made while the other is high-stakes gambling.


Badandy said:
Most posters here are phenomenally ignorant about how the markets work and even basic finance. While it's frustrating that so many people in society have little to no grasp on finance, I'd expect that people should at least be aware of what they do not know and stop throwing out ridiculous statements.
Click to expand...
 
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