Wednesday, April 25, 2012

Aqumin Volatility Newsletter 04/25/2011 - $AAPL, $BAC, $C

Bobbing for Apples

Since AAPL reported last night I will let myself be drawn into the maelstrom of noise and give my two bits on what I see from the AlphaVision™ for Bloomberg point of view. From the fundamental side AAPL makes more money than any analyst thinks possible. AAPL already talked down the next quarter so I am sure there will be room to beat again. The first global company that combines high hardware margins with the power of the Cloud and internet is probably going to baffle the analysts for a while since this scale is really the first of its kind. So while AAPL sells more stuff to China today, let’s look at some relative volatility.

This landscape below is an end of day snap of the S&P 500 looking at 30 Day Historical Volatility and Market Cap. Green buildings are more volatile with dark green names trading over 40% HV30. I highlighted AAPL with C and BAC to illustrate a point. C is trading in the low 30% range for HV30 and BAC in the high 40% range. AAPL is trading in the low 30% range. The big difference is AAPL is a $600 (at least this am) number and C is trading around $33 and BAC is $8+. AAPL has been generating massive realized volatility for such a big name into earnings. The iPhone maker is generating HV30 at near the same level with the poster children of the 2008 financial crisis. From that point of view the balance of panic activity is moving away from the financials, which is probably good for the market as whole. The market is saying it is time to back to speculating on how much companies can make versus how fast they are going to 0.

4-25-2012 9-07-03 AM

After earnings, implied volatility comes down usually around 10 to 20% in the next available month in AAPL. The mistake after this earnings cycle would be to sell too much IV and ignore the big HV in the name. Selling juice in a financial stock going nowhere is one thing, selling juice in a $600 freight train is another.

Read more from Andrew at Option Pit

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