TRADING APPLE
TECHNICALS
APPLE Volatility Technicals - a Low RV and High Price Volatility ? $AAPL #aapl
December 14 ( From TradingView )
December 14 ( From TradingView )
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December 14: a Low RV and High Price Volatility ?
Last week on my Research, I did highlight the risk to Apple Shares til the end
of the year; Here s the summary of it:
Overperformance of Apple Shares, of the XLK Index by far compare to the
Mighty SP500 plus overconfidence from Analysts and Investors are for me
til the end of the year: Houston, We May Have a Problem Here...
We did start to see a correction price in Apple Shares and SP500 Index.
What strikes me at this point is that the Volatility of the Price actually rose tremendously but was not followed as much by the Relative Volatility ( RV ) of Apple Shares as shown by the chart below.
We are within a rare environment were Price Volatility is rising ( shown by the Average True Range - ATR - chart above - red line ) and RV did closed on December 12 at 1.54, well below the average of the past 200 days at 1.78.
I did put an horizontal trendline on the RV at 1.54 that shows previous time when we had the ATR at that level.
To put it even more obvious to look at it, I add vertical lines were ATR was at on December 12.
We can see that RV is very low compare to previous time with ATR that high; look at ellipses at the top panel of the chart. Obviously, RV was higher almost in all other preriod...
Why is that: I think we had huge liquidation of positions in the options market ( too many bulls... ) and maturity of weekly December 12 options that bring the level of RV at cheap level.
So the RV closed at 1.54 level on December 12, surprisingly quite far from the 200 ( DMA - Day Moving Average ) at 1.78.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.78 ).
At that level of 1.54, it is a quite cheap RV and especially at this time of the year.
At the money straddle in one week Options pre-earnings was $4.45, now at $3.99 for the December 20 maturity
So what I am trying to say is simply that at those level of historical Relative Volatility, taking the high Price Volatility into account, you can use options to play or to hedge... But at the time we will have lower Price Volatility, then liquidate your options... I will not go beyond December 20 in any cases...
Stay tuned as I will update you in the Daily as usual for specific trading levels.
END.
Seven main observations emerge from 2013/2014:
1) A rising moving average of that ratio ( 7 days ) is indicative of the price action of Apple Shares. Last signal on December 9 as a Sell as shown by the chart below ( still on ) ...
2) Rising volatility ratio has often coincide with rising Apple Shares. Last example is from November 21...
3) A spike in volatility is often associated with short price corrections ( Dec 6, Oct 22, Sept 20... )
4) On each 3 months option sequence ( January, April, July, October ): a month before, volatility of Apple is rising more than the VIX Index.
5) 3 out of 4 times, at the 3 months option sequence, the stock of Apple gapped down
6) After that 3 months roll out, and gap down in Apple volatility, in each time, the stock of Apple rose...
7) A fall in the ratio is indicative of a fall in Apple stock price
November 23: a High RV ( Relative Volatility ) Before Thanksgiving :
This is a research based on the historical behavior prior and after
Thanksgiving of RV on Apple Shares. This year it will be on November 27.
It is called the Thanksgiving Effect for Apple Shares: Seasonality prior
sales of Thanksgiving.
But this year, with the iPhone 6 and especially the iPhone 6+, expectations
are already through the sky and market seems to be in advance
of the seasonalities...
What I found is quite interesting ( IF history repeat itself for sure ):
1) Taking closing levels for Apple Relative Volatility ( RV ) 5 Trading Days before and 5 Trading Days after the Thanksgiving Dates ( T=0 on the chart below - bottom scale ) of the past 3 years.
2) Applying a normalize level in each case at Thanksgiving Dates ( TG )with a level at 100 in each case
( See chart below - left scale ).
Chart of Apple Shares RV Normalize at 100 on Thanksgiving ( T=0 )
( 2011 to 2013 )
So what I found :
1) RV on average of the past 3 years before the event is declining from T-4 ( 4th Trading Days prior of the event on average) to T=0. From Average of the past 3 years at 1.75 at T-4 to 1.66 at T=0.
Change from T-4 to T=0 was -5.1% in terms of decreasing RV ( Average RV 3 years in orange - chart above )
This year T-4 is November 21 and T=0 is November 27
2) Lowest RV on Average of the past 3 years have at T=0, the Thanksgiving Event:
So in our case will be November 26.
3) Peak RV is the highest after 4 trading days of the event: in our case, will be December 3 2014.
Average change from T=0 to T+4 was +3.8% increasing RV value.
So in summary ( IF history repeat itself ):
RV is weakening From 4 trading sessions prior of the Thanksgiving effect ( So in our case will be November 21 ) to the Thanskiging and rise til 4 trading sessions after ( So in our case will be December 3 2014 ) , on average of the past 3 years.
What have changed compare to the last 5 events :
1) Expectations are the highest of the past 5 years because of the pre-order annoucement.
2) China will be included in the Q4 ER ( which is 15 to 20% of Apple Sales )
3) A bigger iPhone 6+ being offered is already sold out - Are clients will wait or buy the iPhone 6 instead...
4) Since the Split in June 2014, Apple Shares Behavior are different: Retail Participants will bring more Volatility in Apple Shares Prices.
5) SP500 Futures is at the highest ever.
6) Apple Shares reached the highest level ever ( on a ratio basis compare to the SP500 ).
So the RV closed at 1.97 level ( see first chart at the bottom of that page ) on November 21, surprisingly quite far from the 200 ( DMA - Day Moving Average ) at 1.76.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.76 ).
At that level of 1.97, it is a quite expensive RV and especially at this time of the year.
Previous average of the RV of the past 3 years at T-4 is 1.75.
At the money straddle in one week Options pre- earnings was $4.45, now at $2.39 for the November 28 maturity
So what I am trying to say is simply that at those level of historical Expensive Relative Volatility, you can trade them but not hold them for too long before Thanksgiving as History tells us a declining RV and time decay will be priced for the Thanksgiving Holiday. RV is rising thereafter Thanksgiving though...
Stay tuned as I will update you in the Daily as usual for specific trading levels.
A research that I found interesting: Apple Tends to Underperform Ahead of Turkey Day, Says Citi
November 2: a low RV ( Relative Volatility ) and a High Price :
After a strong earnings release on October 20, Apple Shares had a
tremendous performance - +8.3%
A few things must be mentioned though:
1) A Hanging Man Pattern on Apple on a daily basis
Usually an Hanging Man Pattern is seen as a Bearish Reversal:
The reliability of this signal is drastically improved when the price of the asset
decreases the day after the signal.
2) Previous Peak in Price have always been in an higher RV Environment:
Taking the previous peak in price of Apple Shares ( June 10, July 8 and 29, September 2 ), what we can observe is that RV was always higher by a lot; respectively for dates: 1.99, 2.25 and 1.74, 2.12 ) compare to 1.51 on October 31 close.
And if I take only the Volatility and not the RV ( see second chart below ) for the same dates, we have:
21.86, 27.00 and 23.06, 25.95 compare to 21.20 on October 31 close.
So the RV closed at 1.51 level ( see first chart at the bottom of that page ) on October 31, surprisingly quite far from the 200 ( DMA - Day Moving Average ) at 1.76.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.76 ).
At that level of 1.51, it is not expensive at all and especially at this time of the year.
And if we take only the Volatility of Apple Shares ( and not the RV ), same conclusion.
At the money straddle in one week Options pre- earnings was $4.45, now at $2.10 for the November 7 maturity -
So what I am trying to say is simply that at those level of not Expensive Relative Volatility and Volatility, I am really interested to consider switching some risks to the options market from the common stock of Apple Shares.
Stay tuned as I will update you in the Daily as usual for specific trading levels.
October 6 RV ( Relative Volatility ) Before Q4 ER ( Earnings Release ):
This is the updated portion of the research made on September 21 but based
prior of the release of Apple Q4 ER that should be published by Apple on
October 20.
As usual, when Apple announce the ER date, market start to speculate on
potential earnings for Q4.
But this year, with the iPhone 6 and especially the iPhone 6+,
expectations are already through the sky. But as we know, China will not be
included in that number this year, which is adding some nervousness on the forecast.
So the RV closed at 1.85 level ( see chart at the bottom of that page ) on October, surprisingly not far from the 200 ( DMA- Day Moving Average ) at 1.84.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.85 ).
At that level of 1.85, it is not expensive at all and especially at this time of the year. I did a special research on Apple Shares RV around Q4 ER schedule for Oct 20 this year.
What I found is quite interesting ( IF history repeat itself for sure ):
1) Taking closing levels for Apple Shares Relative Volatility 11 Trading Days before and 5 Trading Days after the ER dates ( t+0 on the chart below - bottom scale ) of the past 3 years
2) Applying a normalize level in each case at ER Dates with a level at 100 in each case
( See chart below - left scale ).
Chart of Apple Shares RV Normalize at 100 on Q4 ER Days
( 2011 to 2013 )
So what I found :
1) RV on average of the past 3 years before the event is grinding 9 Trading Days prior of the event on average.
( RV Average 3 years in orange - cahrt above )
2) Closing Relative Volatility on October 3 2014 at 1.85 is the average of the short sample, 11 Trading Days prior to October Event: ( 2.03 in 2013, 2.34 in 2012 and 1.19 in 2011 ).
3) Peak Relative Volatility is the highest on 4 Trading Days before the event: in our case, will be Oct 15 2014.
4) From the event plus 1 trading session, RV Collapse: ( Taking Closing RV as a Proxy of the past 3 years ) is
( in our case Oct 20 2014 ): So from a normalize 100.0 at event Date, it tumble to 81.26 1 day1 after the event.
So RV fell on average of the previous 3 Years for the event by 18.7% 1 day Day after the event.
So what I am trying to say is simply that at those level of not Expensive Relative Volatility, I am really interested being long vol because I think that this year will be more volatile than the past 3 years.
What have changed compare to the last 3 events :
1) Expectations are the highest of the past 3 years because of the pre-order annoucement.
2) China will not be included in the Q4 ER ( which is 15 to 20% of Apple Sales )
3) A bigger iPhone 6+ being offered is already sold out - Are clients will wait or buy the iPhone 6 instead...
4) Since the Split in June 2014, Apple Shares Behavior are different: Retail Participants will bring more Volatility in Apple Shares Prices.
5) We are almost at the highest level for the SP500 of the past 5 years.
Stay tuned as I will update you in the Daily as usual for specific trading levels.
September 21 RV ( Relative Volatility ): Pot Pourri ?
This is the updated portion of the research made on September 7 but based
on the First Weekend iPhone Sales that should be published by Apple on
September 22. I did add some of my comments and a few very good articles
at the end of my own research...
As usual, when Apple announce the First Weekend iPhone Sales at each
september, market start to speculate on potential earnings for Q4.
But this year, with the iPhone 6 and especially the iPhone 6+,
expectations are already through the sky. But as we know, China will not be included in that number this year, which is adding some nervousness on the forecast of the First Weekend iPhone Sales.
So the RV closed at 2.03 level ( see chart at the bottom of that page ) on September 19, surprisingly not far from the 200 ( DMA- Day Moving Average ) at 1.85.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.85 ).
At that level of 2.03, it is not expensive at all and especially at this time of the year. I did a special research on Apple Shares RV around First Weekend iPhone Sales in September schedule for Sep 22 this year.
What I found is quite interesting ( IF history repeat itself for sure ):
1) Taking closing levels for Apple Shares Relative Volatility 5 Trading Days before and 5 Trading Days after the First Weekend iPhone Sales ( t+0 on the chart below - bottom scale ) of the past 3 years
2) Applying a normalize level in each case at First Weekend iPhone Sales Dates with a level at 100 in
each case ( See chart below - left scale ).
Chart of Apple Shares RV Normalize at 100 on SE Days
( 2011 to 2013 )
So what I found :
1) RV on average of the past 3 years before the event is grinding 3 Trading Days prior of the event on average.
2) Closing Relative Volatility on September 19 2014 at 2.03 is the is within the range of the short sample, one Trading Days prior to September Events: ( 2.09 in 2013, 2.11 in 2012 and 1.31 in 2011 ).
3) Peak Relative Volatility is the highest on one Trading Day before the event: in our case, was Sep 19 2014.
4) From the event plus two trading session, RV Collapse: ( Taking Closing RV as a Proxy of the past 3 years ) is
( in our case Sep 24 2014 ): So from a normalize 100.0 at event Date, it tumble to 93.04 2 days after the event.
So RV fell on average of the previous 3 Years for the event by 6.9% 2 days Day after the event.
But notice how 2011 was a huge drag... Excluding it, it was slighlty positive...
So what I am trying to say is simply that at those level of not Expensive Relative Volatility, I am really interested being long vol because I think that this year will be more volatile than the past 3 years.
What have changed compare to the last 3 events :
1) Expectations are the highest of the past 3 years because of the preorder annoucement.
2) China will not be included in the First Weekend iPhone Sales ( which is 15 to 20% of Apple Sales )
3) A bigger iPhone 6+ being offered is already sold out - Are clients will wait or buy the iPhone 6 instead...
4) Since the Split in June 2014, Apple Shares Behavior are different: Retail Participants will bring more Volatility in Apple Shares Prices.
5) We are at the highest level for the SP500 of the past 5 years.
Stay tuned as I will update you in the Daily as usual for specific trading levels.
Interesting articles:
1) Making Cents Of iPhone Unit Sales Announcements
2) IPhone 6 Plus Starts to Sell Out in Some U.S. Stores
3) MUNSTER: iPhone 6 Plus Demand Greater Than Expected, And Customers Are Paying More For Storage
4) Apple: Record iPhone 6 Pre-Orders Versus No China In 2014
September 8 RV ( Relative Volatility ): RV Going Through the Roof ?
This is the updated portion of the research last week, I did add some of my
comments and a few very good articles articles at the end though...
As usual, when Apple announce the annual event at each september, market
start to speculate a lot more on products and potential earnings.
But this year, with the iPhone 6 with including probable mobile payments
and the introduction of the iWatch, expectations are already through the sky.
So the RV closed at 2.52 level ( see chart at the bottom of that page ) on
September 5, well above the 200 ( DMA- Day Moving Average ) at 1.82.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.82 ).
At that level of 2.52, it is very expensive and especially at this time of the year. I did a special research on Apple Shares RV around special events ( SE ) in September schedule for Sep 9 this year.
What I found is quite interesting ( IF history repeat itself for sure ):
1) Taking closing prices for Apple Shares Relative Volatility 5 Trading Days before and 5 Trading Days after September Event ( t+0 on the chart below - bottom scale ) of the past 3 years
2) Applying a normalize price in each case at SE Dates with a level at 100 in
each case ( See chart below - left scale ).
Chart of Apple Shares RV Normalize at 100 on SE Days
( 2011 to 2013 )
So what I found :
1) RV on average of the past 3 years before SE is grinding 3 Trading Days prior of the SE - this is the highest level reached prior SE on average.
2) Closing Relative Volatility on August 29 2014 at 2.19 is the highest of the short sample, five Trading Days prior to September Events: ( 1.89 in 2013, 1.68 in 2012 and 1.02 in 2011 ).
3) Peak Relative Volatility is the highest on one Trading Day after SE: in our case, will be Sep 10 2014.
4) From SE plus one trading session, RV Collapse: ( Taking Closing RV as a Proxy of the past 3 years ) is
( in our case Sep 10 2014 ): So from a normalize 102.1 at SE Date+1, it tumble to 94.6 4 days after SE
So RV fell on average of the previous 3 Years for SE of 7.3% 5 days Day after SE.
So what I am trying to say is simply that at those level of Very Expensive Relative Volatility, I am not really interested being long vol. What I do recommend for the ones who still want to be involved in options is, intead of a call or put, do a call or put sread to minimize the impact of Revalive Volativety if it start to fall at SE+1 trading day.
I will keep you posted on the Daily on that - as usual.
What have changed compare to the last 5 SE :
1) Expectations are the highest of the past 3 years according to RV.
2) Since the Split in June 2014, Apple Shares Behavior are different: Retail Participants will bring more Volatility in Apple Shares Prices.
3) We are at the highest level for the SP500 of the past 5 years.
Stay tuned as I will update you in the Daily as usual.
Comments on the Upcoming Special Event ( SE ):
1) SE events like these bring a lot of volatility.
2) It will be held at 10 a.m. PDT September 9 - so the market will be open...
3) For the market, It's all about iWatch this week: expectations are an immediate availability. IF postpone to Christmas or beyond, it will have a negative impact on Apple Shares ( -3% ? ).
4) For me, not the iWatch or the iPhone6 is the real opportunity for Apple, but their NFC capabilites and mobile payment. That for me can bring a lot in terms of future profits AND lock users into Apple ecosystem:
it will have a positive impact on Apple Shares ( +6% in a month ? ).
5) It is not my trading style to bear SE risks. But because it will be held when the market is open can bring tremendous intraday trading opportunities... Stay tuned for September 9...
Interesting articles:
1) Must Read: What the new iPhone launch has in store for Apple’s stock performance
A MarketTrends Special Report by Colin Cieszynski, Market Analyst, CMC Markets
2) Base Scenario: Apple's Mobile Payment Service Generates $2 Billion In Revenue
3) Forget the iPhone: It's all about iWatch next week
4) Apple's NFC plans go way beyond payments, analysts say
5) Apple's 'iWallet' payments seen as unlikely to earn much money, but will lock in users to iPhone ecosystem
I started to analyse the sequence in volatility ratio change for Apple.
Seven main observations emerge from 2013/2014:
1) A rising moving average of that ratio ( 7 days ) is indicative of the price action of Apple Shares. Last signal on December 9 as a Sell as shown by the chart below ( still on ) ...
2) Rising volatility ratio has often coincide with rising Apple Shares. Last example is from November 21...
3) A spike in volatility is often associated with short price corrections ( Dec 6, Oct 22, Sept 20... )
4) On each 3 months option sequence ( January, April, July, October ): a month before, volatility of Apple is rising more than the VIX Index.
5) 3 out of 4 times, at the 3 months option sequence, the stock of Apple gapped down
6) After that 3 months roll out, and gap down in Apple volatility, in each time, the stock of Apple rose...
7) A fall in the ratio is indicative of a fall in Apple stock price
Last week on my Research, I did highlight the risk to Apple Shares til the end
of the year; Here s the summary of it:
Overperformance of Apple Shares, of the XLK Index by far compare to the
Mighty SP500 plus overconfidence from Analysts and Investors are for me
til the end of the year: Houston, We May Have a Problem Here...
We did start to see a correction price in Apple Shares and SP500 Index.
What strikes me at this point is that the Volatility of the Price actually rose tremendously but was not followed as much by the Relative Volatility ( RV ) of Apple Shares as shown by the chart below.
We are within a rare environment were Price Volatility is rising ( shown by the Average True Range - ATR - chart above - red line ) and RV did closed on December 12 at 1.54, well below the average of the past 200 days at 1.78.
I did put an horizontal trendline on the RV at 1.54 that shows previous time when we had the ATR at that level.
To put it even more obvious to look at it, I add vertical lines were ATR was at on December 12.
We can see that RV is very low compare to previous time with ATR that high; look at ellipses at the top panel of the chart. Obviously, RV was higher almost in all other preriod...
Why is that: I think we had huge liquidation of positions in the options market ( too many bulls... ) and maturity of weekly December 12 options that bring the level of RV at cheap level.
So the RV closed at 1.54 level on December 12, surprisingly quite far from the 200 ( DMA - Day Moving Average ) at 1.78.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.78 ).
At that level of 1.54, it is a quite cheap RV and especially at this time of the year.
At the money straddle in one week Options pre-earnings was $4.45, now at $3.99 for the December 20 maturity
So what I am trying to say is simply that at those level of historical Relative Volatility, taking the high Price Volatility into account, you can use options to play or to hedge... But at the time we will have lower Price Volatility, then liquidate your options... I will not go beyond December 20 in any cases...
Stay tuned as I will update you in the Daily as usual for specific trading levels.
END.
Seven main observations emerge from 2013/2014:
1) A rising moving average of that ratio ( 7 days ) is indicative of the price action of Apple Shares. Last signal on December 9 as a Sell as shown by the chart below ( still on ) ...
2) Rising volatility ratio has often coincide with rising Apple Shares. Last example is from November 21...
3) A spike in volatility is often associated with short price corrections ( Dec 6, Oct 22, Sept 20... )
4) On each 3 months option sequence ( January, April, July, October ): a month before, volatility of Apple is rising more than the VIX Index.
5) 3 out of 4 times, at the 3 months option sequence, the stock of Apple gapped down
6) After that 3 months roll out, and gap down in Apple volatility, in each time, the stock of Apple rose...
7) A fall in the ratio is indicative of a fall in Apple stock price
November 23: a High RV ( Relative Volatility ) Before Thanksgiving :
This is a research based on the historical behavior prior and after
Thanksgiving of RV on Apple Shares. This year it will be on November 27.
It is called the Thanksgiving Effect for Apple Shares: Seasonality prior
sales of Thanksgiving.
But this year, with the iPhone 6 and especially the iPhone 6+, expectations
are already through the sky and market seems to be in advance
of the seasonalities...
What I found is quite interesting ( IF history repeat itself for sure ):
1) Taking closing levels for Apple Relative Volatility ( RV ) 5 Trading Days before and 5 Trading Days after the Thanksgiving Dates ( T=0 on the chart below - bottom scale ) of the past 3 years.
2) Applying a normalize level in each case at Thanksgiving Dates ( TG )with a level at 100 in each case
( See chart below - left scale ).
Chart of Apple Shares RV Normalize at 100 on Thanksgiving ( T=0 )
( 2011 to 2013 )
So what I found :
1) RV on average of the past 3 years before the event is declining from T-4 ( 4th Trading Days prior of the event on average) to T=0. From Average of the past 3 years at 1.75 at T-4 to 1.66 at T=0.
Change from T-4 to T=0 was -5.1% in terms of decreasing RV ( Average RV 3 years in orange - chart above )
This year T-4 is November 21 and T=0 is November 27
2) Lowest RV on Average of the past 3 years have at T=0, the Thanksgiving Event:
So in our case will be November 26.
3) Peak RV is the highest after 4 trading days of the event: in our case, will be December 3 2014.
Average change from T=0 to T+4 was +3.8% increasing RV value.
So in summary ( IF history repeat itself ):
RV is weakening From 4 trading sessions prior of the Thanksgiving effect ( So in our case will be November 21 ) to the Thanskiging and rise til 4 trading sessions after ( So in our case will be December 3 2014 ) , on average of the past 3 years.
What have changed compare to the last 5 events :
1) Expectations are the highest of the past 5 years because of the pre-order annoucement.
2) China will be included in the Q4 ER ( which is 15 to 20% of Apple Sales )
3) A bigger iPhone 6+ being offered is already sold out - Are clients will wait or buy the iPhone 6 instead...
4) Since the Split in June 2014, Apple Shares Behavior are different: Retail Participants will bring more Volatility in Apple Shares Prices.
5) SP500 Futures is at the highest ever.
6) Apple Shares reached the highest level ever ( on a ratio basis compare to the SP500 ).
So the RV closed at 1.97 level ( see first chart at the bottom of that page ) on November 21, surprisingly quite far from the 200 ( DMA - Day Moving Average ) at 1.76.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.76 ).
At that level of 1.97, it is a quite expensive RV and especially at this time of the year.
Previous average of the RV of the past 3 years at T-4 is 1.75.
At the money straddle in one week Options pre- earnings was $4.45, now at $2.39 for the November 28 maturity
So what I am trying to say is simply that at those level of historical Expensive Relative Volatility, you can trade them but not hold them for too long before Thanksgiving as History tells us a declining RV and time decay will be priced for the Thanksgiving Holiday. RV is rising thereafter Thanksgiving though...
Stay tuned as I will update you in the Daily as usual for specific trading levels.
A research that I found interesting: Apple Tends to Underperform Ahead of Turkey Day, Says Citi
November 2: a low RV ( Relative Volatility ) and a High Price :
After a strong earnings release on October 20, Apple Shares had a
tremendous performance - +8.3%
A few things must be mentioned though:
1) A Hanging Man Pattern on Apple on a daily basis
Usually an Hanging Man Pattern is seen as a Bearish Reversal:
The reliability of this signal is drastically improved when the price of the asset
decreases the day after the signal.
2) Previous Peak in Price have always been in an higher RV Environment:
Taking the previous peak in price of Apple Shares ( June 10, July 8 and 29, September 2 ), what we can observe is that RV was always higher by a lot; respectively for dates: 1.99, 2.25 and 1.74, 2.12 ) compare to 1.51 on October 31 close.
And if I take only the Volatility and not the RV ( see second chart below ) for the same dates, we have:
21.86, 27.00 and 23.06, 25.95 compare to 21.20 on October 31 close.
So the RV closed at 1.51 level ( see first chart at the bottom of that page ) on October 31, surprisingly quite far from the 200 ( DMA - Day Moving Average ) at 1.76.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.76 ).
At that level of 1.51, it is not expensive at all and especially at this time of the year.
And if we take only the Volatility of Apple Shares ( and not the RV ), same conclusion.
At the money straddle in one week Options pre- earnings was $4.45, now at $2.10 for the November 7 maturity -
So what I am trying to say is simply that at those level of not Expensive Relative Volatility and Volatility, I am really interested to consider switching some risks to the options market from the common stock of Apple Shares.
Stay tuned as I will update you in the Daily as usual for specific trading levels.
October 6 RV ( Relative Volatility ) Before Q4 ER ( Earnings Release ):
This is the updated portion of the research made on September 21 but based
prior of the release of Apple Q4 ER that should be published by Apple on
October 20.
As usual, when Apple announce the ER date, market start to speculate on
potential earnings for Q4.
But this year, with the iPhone 6 and especially the iPhone 6+,
expectations are already through the sky. But as we know, China will not be
included in that number this year, which is adding some nervousness on the forecast.
So the RV closed at 1.85 level ( see chart at the bottom of that page ) on October, surprisingly not far from the 200 ( DMA- Day Moving Average ) at 1.84.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.85 ).
At that level of 1.85, it is not expensive at all and especially at this time of the year. I did a special research on Apple Shares RV around Q4 ER schedule for Oct 20 this year.
What I found is quite interesting ( IF history repeat itself for sure ):
1) Taking closing levels for Apple Shares Relative Volatility 11 Trading Days before and 5 Trading Days after the ER dates ( t+0 on the chart below - bottom scale ) of the past 3 years
2) Applying a normalize level in each case at ER Dates with a level at 100 in each case
( See chart below - left scale ).
Chart of Apple Shares RV Normalize at 100 on Q4 ER Days
( 2011 to 2013 )
So what I found :
1) RV on average of the past 3 years before the event is grinding 9 Trading Days prior of the event on average.
( RV Average 3 years in orange - cahrt above )
2) Closing Relative Volatility on October 3 2014 at 1.85 is the average of the short sample, 11 Trading Days prior to October Event: ( 2.03 in 2013, 2.34 in 2012 and 1.19 in 2011 ).
3) Peak Relative Volatility is the highest on 4 Trading Days before the event: in our case, will be Oct 15 2014.
4) From the event plus 1 trading session, RV Collapse: ( Taking Closing RV as a Proxy of the past 3 years ) is
( in our case Oct 20 2014 ): So from a normalize 100.0 at event Date, it tumble to 81.26 1 day1 after the event.
So RV fell on average of the previous 3 Years for the event by 18.7% 1 day Day after the event.
So what I am trying to say is simply that at those level of not Expensive Relative Volatility, I am really interested being long vol because I think that this year will be more volatile than the past 3 years.
What have changed compare to the last 3 events :
1) Expectations are the highest of the past 3 years because of the pre-order annoucement.
2) China will not be included in the Q4 ER ( which is 15 to 20% of Apple Sales )
3) A bigger iPhone 6+ being offered is already sold out - Are clients will wait or buy the iPhone 6 instead...
4) Since the Split in June 2014, Apple Shares Behavior are different: Retail Participants will bring more Volatility in Apple Shares Prices.
5) We are almost at the highest level for the SP500 of the past 5 years.
Stay tuned as I will update you in the Daily as usual for specific trading levels.
September 21 RV ( Relative Volatility ): Pot Pourri ?
This is the updated portion of the research made on September 7 but based
on the First Weekend iPhone Sales that should be published by Apple on
September 22. I did add some of my comments and a few very good articles
at the end of my own research...
As usual, when Apple announce the First Weekend iPhone Sales at each
september, market start to speculate on potential earnings for Q4.
But this year, with the iPhone 6 and especially the iPhone 6+,
expectations are already through the sky. But as we know, China will not be included in that number this year, which is adding some nervousness on the forecast of the First Weekend iPhone Sales.
So the RV closed at 2.03 level ( see chart at the bottom of that page ) on September 19, surprisingly not far from the 200 ( DMA- Day Moving Average ) at 1.85.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.85 ).
At that level of 2.03, it is not expensive at all and especially at this time of the year. I did a special research on Apple Shares RV around First Weekend iPhone Sales in September schedule for Sep 22 this year.
What I found is quite interesting ( IF history repeat itself for sure ):
1) Taking closing levels for Apple Shares Relative Volatility 5 Trading Days before and 5 Trading Days after the First Weekend iPhone Sales ( t+0 on the chart below - bottom scale ) of the past 3 years
2) Applying a normalize level in each case at First Weekend iPhone Sales Dates with a level at 100 in
each case ( See chart below - left scale ).
Chart of Apple Shares RV Normalize at 100 on SE Days
( 2011 to 2013 )
So what I found :
1) RV on average of the past 3 years before the event is grinding 3 Trading Days prior of the event on average.
2) Closing Relative Volatility on September 19 2014 at 2.03 is the is within the range of the short sample, one Trading Days prior to September Events: ( 2.09 in 2013, 2.11 in 2012 and 1.31 in 2011 ).
3) Peak Relative Volatility is the highest on one Trading Day before the event: in our case, was Sep 19 2014.
4) From the event plus two trading session, RV Collapse: ( Taking Closing RV as a Proxy of the past 3 years ) is
( in our case Sep 24 2014 ): So from a normalize 100.0 at event Date, it tumble to 93.04 2 days after the event.
So RV fell on average of the previous 3 Years for the event by 6.9% 2 days Day after the event.
But notice how 2011 was a huge drag... Excluding it, it was slighlty positive...
So what I am trying to say is simply that at those level of not Expensive Relative Volatility, I am really interested being long vol because I think that this year will be more volatile than the past 3 years.
What have changed compare to the last 3 events :
1) Expectations are the highest of the past 3 years because of the preorder annoucement.
2) China will not be included in the First Weekend iPhone Sales ( which is 15 to 20% of Apple Sales )
3) A bigger iPhone 6+ being offered is already sold out - Are clients will wait or buy the iPhone 6 instead...
4) Since the Split in June 2014, Apple Shares Behavior are different: Retail Participants will bring more Volatility in Apple Shares Prices.
5) We are at the highest level for the SP500 of the past 5 years.
Stay tuned as I will update you in the Daily as usual for specific trading levels.
Interesting articles:
1) Making Cents Of iPhone Unit Sales Announcements
2) IPhone 6 Plus Starts to Sell Out in Some U.S. Stores
3) MUNSTER: iPhone 6 Plus Demand Greater Than Expected, And Customers Are Paying More For Storage
4) Apple: Record iPhone 6 Pre-Orders Versus No China In 2014
September 8 RV ( Relative Volatility ): RV Going Through the Roof ?
This is the updated portion of the research last week, I did add some of my
comments and a few very good articles articles at the end though...
As usual, when Apple announce the annual event at each september, market
start to speculate a lot more on products and potential earnings.
But this year, with the iPhone 6 with including probable mobile payments
and the introduction of the iWatch, expectations are already through the sky.
So the RV closed at 2.52 level ( see chart at the bottom of that page ) on
September 5, well above the 200 ( DMA- Day Moving Average ) at 1.82.
Taking the past year as historical data, we had a low in Relative Volatility ( taking closing levels ) of 1.18 on February 5 2014 and a high level reached on October 25 2013 at 2.80. The average level ( taking the average of the past 200 trading sessions is 1.82 ).
At that level of 2.52, it is very expensive and especially at this time of the year. I did a special research on Apple Shares RV around special events ( SE ) in September schedule for Sep 9 this year.
What I found is quite interesting ( IF history repeat itself for sure ):
1) Taking closing prices for Apple Shares Relative Volatility 5 Trading Days before and 5 Trading Days after September Event ( t+0 on the chart below - bottom scale ) of the past 3 years
2) Applying a normalize price in each case at SE Dates with a level at 100 in
each case ( See chart below - left scale ).
Chart of Apple Shares RV Normalize at 100 on SE Days
( 2011 to 2013 )
So what I found :
1) RV on average of the past 3 years before SE is grinding 3 Trading Days prior of the SE - this is the highest level reached prior SE on average.
2) Closing Relative Volatility on August 29 2014 at 2.19 is the highest of the short sample, five Trading Days prior to September Events: ( 1.89 in 2013, 1.68 in 2012 and 1.02 in 2011 ).
3) Peak Relative Volatility is the highest on one Trading Day after SE: in our case, will be Sep 10 2014.
4) From SE plus one trading session, RV Collapse: ( Taking Closing RV as a Proxy of the past 3 years ) is
( in our case Sep 10 2014 ): So from a normalize 102.1 at SE Date+1, it tumble to 94.6 4 days after SE
So RV fell on average of the previous 3 Years for SE of 7.3% 5 days Day after SE.
So what I am trying to say is simply that at those level of Very Expensive Relative Volatility, I am not really interested being long vol. What I do recommend for the ones who still want to be involved in options is, intead of a call or put, do a call or put sread to minimize the impact of Revalive Volativety if it start to fall at SE+1 trading day.
I will keep you posted on the Daily on that - as usual.
What have changed compare to the last 5 SE :
1) Expectations are the highest of the past 3 years according to RV.
2) Since the Split in June 2014, Apple Shares Behavior are different: Retail Participants will bring more Volatility in Apple Shares Prices.
3) We are at the highest level for the SP500 of the past 5 years.
Stay tuned as I will update you in the Daily as usual.
Comments on the Upcoming Special Event ( SE ):
1) SE events like these bring a lot of volatility.
2) It will be held at 10 a.m. PDT September 9 - so the market will be open...
3) For the market, It's all about iWatch this week: expectations are an immediate availability. IF postpone to Christmas or beyond, it will have a negative impact on Apple Shares ( -3% ? ).
4) For me, not the iWatch or the iPhone6 is the real opportunity for Apple, but their NFC capabilites and mobile payment. That for me can bring a lot in terms of future profits AND lock users into Apple ecosystem:
it will have a positive impact on Apple Shares ( +6% in a month ? ).
5) It is not my trading style to bear SE risks. But because it will be held when the market is open can bring tremendous intraday trading opportunities... Stay tuned for September 9...
Interesting articles:
1) Must Read: What the new iPhone launch has in store for Apple’s stock performance
A MarketTrends Special Report by Colin Cieszynski, Market Analyst, CMC Markets
2) Base Scenario: Apple's Mobile Payment Service Generates $2 Billion In Revenue
3) Forget the iPhone: It's all about iWatch next week
4) Apple's NFC plans go way beyond payments, analysts say
5) Apple's 'iWallet' payments seen as unlikely to earn much money, but will lock in users to iPhone ecosystem
I started to analyse the sequence in volatility ratio change for Apple.
Seven main observations emerge from 2013/2014:
1) A rising moving average of that ratio ( 7 days ) is indicative of the price action of Apple Shares. Last signal on December 9 as a Sell as shown by the chart below ( still on ) ...
2) Rising volatility ratio has often coincide with rising Apple Shares. Last example is from November 21...
3) A spike in volatility is often associated with short price corrections ( Dec 6, Oct 22, Sept 20... )
4) On each 3 months option sequence ( January, April, July, October ): a month before, volatility of Apple is rising more than the VIX Index.
5) 3 out of 4 times, at the 3 months option sequence, the stock of Apple gapped down
6) After that 3 months roll out, and gap down in Apple volatility, in each time, the stock of Apple rose...
7) A fall in the ratio is indicative of a fall in Apple stock price
Ratio of Relative Volatility CBOE
AAPL
VIX Index
AAPL
VIX Index
Volatility CBOE
AAPL
AAPL
Apple Shares Price ( Bar )
Ratio of Relative Volatility CBOE AAPL vs VIX Index ( Candles )
Average True Range ( Red Line - Bottom Panel )
Ratio of Relative Volatility CBOE AAPL vs VIX Index ( Candles )
Average True Range ( Red Line - Bottom Panel )
