
AAPL closes at exactly $500.00 - barredo
http://finance.yahoo.com/q/hp?s=AAPL&a=08&b=7&c=2012&d=00&e=19&f=2013&g=d
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kjackson2012
This was expected, since the price of stocks tends to get "pinned" to expiring
options, which expired today. I was talking to one of my friends about AAPL
being pinned at $500 yesterday.

The closest strike price for options expiring today, with the highest open
interest, was the 500 strike price. If I remember correctly, there were 30k+
contracts at this price. On Thursday night, those options were priced at
around $4.95, or $495 per contract.

There was a great deal of incentive for market makers to pin the price of AAPL
at $500, rendering all those options worthless.

Looks like it worked.

~~~
mercuryrising
Can you more generally explain what your comment means?

Here's my stab (way off I'm sure): So some people have options of Apple's
stock. They have to buy 100 shares for every option (contract) they have. The
options make interest from when they were offered, and they have to make a
decision (strike price) when a certain stock price is reached (is this
determined by the company offering the stocks?). As Apple's stock was more
expensive at the time than the options, there wasn't an advantage is taking up
the options?

~~~
thingylab
Wow wow wow. This whole "prices are pinned around a strike" story does not
make any sense.

First, a quick search on bloomberg reveals that stocks belonging to the S&P
500 (with liquid options) do not tend to close at exactly the most liquid
option strike price on expiry dates, so a close at 500.00 is not "expected"
for AAPL, or any other stock, today.

Second, if you'd take 30 seconds to look up what an option is, you'd discover
that option can be either calls or puts (options to buy or sell, respectively)
so when the spot (market) price of AAPL is 495 at expiry, the 500 call is
worthless, but not the 500 put is not. Third, the market for options is not
the only one responsible for the spot price, if only because a lot of people
actually trade AAPL stocks independently of AAPL options.

Finally, most people who trade options do not give a damn about the spot
price, instead they care about the (implied) volatility. Roughly, it means
your profit/loss on an option position is largely immune to the moves in the
underlying stock price (just look at people hedging variance swaps).

------
barredo
More: [http://seekingalpha.com/article/1002601-buy-apple-on-
january...](http://seekingalpha.com/article/1002601-buy-apple-on-january-18)

> But now, however, the gains of the Summer have come back in and Apple's
> share price has only to stay flat for the next two months for all those call
> options to expire worthless. The institutional money managers that wrote
> those options, if they were to try to manipulate Apple's share price, have a
> lot of incentive to keep Apple in place for a short time, then drive it
> higher:

> Apple is getting a lot of buzz for being undervalued here, but there is an
> enormous amount of pressure on the price at these levels that will be lifted
> after options expiration. If you like Apple, consider having some patience
> here and making a buy at the end of the day on Friday, January 18th, 2013.

~~~
dizzysoul
Wow. Maybe it's naive for me to ask, but is this even legal?

~~~
btian
Absolutely. If someone else (preferably rich) thinks that $500 doesn't justify
true value of Apple, he could buy in the market, and good luck to short-
sellers to borrow so many to sell.

My guess is that it's just some insider selling, and it's coincidental that it
closed at $500 on option expiry date. Otherwise it would be hard to explain
how it ended at $486 on Wednesday.

~~~
kjackson2012
It's not legal. It's price manipulation. However, the SEC doesn't care,
because it's very hard to prove.

~~~
travisp
If you're sure the price is being manipulated low or high in the short term,
then you have a very easy money making opportunity.

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confluence
This is on Hacker News why?

Daily stock market quotes are like comments or articles on gossip blogs - it's
the opinion of ~0.001% of the market for ~1 second - and the opinion that they
give is usually wrong.

~~~
drchiu
I think unless you've played with options, you won't have a clue why a close
like $500 is a big deal.

This basically causes all calls/puts option contracts on either side to be
worthless. It is commonly accepted "fact" (note the quotations) that stock
prices are manipulated to some degree on options expiration days to minimize
losses of contract writers, who could typically be traders from hedge funds or
from some investment bank.

~~~
keithwinstein
I don't quite follow. Exchange-traded options are American-style options --
they can be exercised any day until the expiration date. Somebody who owns a
call option @ $500 can exercise it profitably as long as the bid goes above
$500 at any point before it expires. Why is the closing price on the last day
so important?

~~~
encoderer
Exactly. The expiration is the friday before the 3rd saturday of the
expiration month -- which is quarterly. So calls and puts sold during the
price run-up the last few months expired today.

That said, I don't really believe the manipulation story. Perhaps a small
amount of market manipulation occurred, but it's not the reason AAPL is in a
slump. For that, I think mental state and market sentiment are far far more
powerful factors.

~~~
thingylab
Quick correction here: AAPL has weekly, monthly and quarterly options.

Weeklies expire every friday (except on fridays when it is also a monthly
expiry - the third friday of every month).

Quarterlies expire the last business day of march, june, september and
december.

------
incision
1) Of course stock prices suffer manipulation.

2) The braying about banker manipulation is necessarily louder here because
AAPL is beyond popular with retail investors. Look at just about any
charting/analysis site, it has been the most popular symbol on most days for
years.

------
thingylab
I got seriously pissed because a bunch of idiots got excited about the number
500 and Apple, so this will probably be my last comment on this thread.

Anyway, let me tell you this: I work for a (fairly) big 'global macro' hedge
fund. Historically we traded fx and rates, but we started (slowly) trading
equity last year. The rationale given to our investors was: "the equity market
is full of arbitrage opportunities because it is very much a retail market and
people tend to trade out of 'gut feelings'.

We are not manipulating the market. You are, and we are profiting from it.
Suckers.

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apaprocki
This is all tracked very well over at <http://aaplpain.com/?page_id=8> for
those interested in the options market around AAPL.

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frugalmail
The marketing is sure working on the lemmings.

