Kevin Cook best optiontrader (图2) (图)

http://www.onn.tv/buy-and-trade/apple-aapl-whisper-number-and-expected-earnings-move/ MARKETS VIX 23.47 -1.16 (-4.94%) VIXDowNasdaqS&P 500 VIX 23.47 -1.16 -4.94% Dow (DJX) 104.25 +1.03 +1.00% Nasdaq (NDX) 1875.38 +12.28 +0.66% S&P 500 (SPX) 1102.66 +8.99 +0.82% CLOSE home > Analysis>Buy and Trade Apple (AAPL) whisper number and expected earnings move History of beating expectations is probably priced in by Kevin Cook in Buy and Trade April 20, 2010 - 11:21 am EDT Comments (1) Related Symbols: AAPL XWelcome to the Options News Network, where we offer trading news, analysis, and ideas. Want to learn more about options? Check out our Education page to get started.Apple Inc. (NASDAQ: AAPL) is due to report earnings today after the market close. The consensus estimate by analysts is for $2.43 EPS, while the “whisper number” according to WhisperNumber.com is for $2.45. The WhisperNumber.com data, which describes the typical movement of AAPL after an earnings release, reveals a strong pattern of positive surprises, and a unique pattern of post-event price movement. First, let’s look at what option markets are predicting for possible price movement. The bell curve diagram below marks the expected trading range that option traders are betting will be most likely after AAPL’s report. Since option volatility is just standard deviation, the 30% volatility implied by options prices is telling us that there is about a 68% chance AAPL will remain within a range of $23 higher or lower (from current levels around $247 as of Monday’s close) through May 21 options expiration. Keep in mind that this is today’s best estimate by options markets of the probability and risk. Tomorrow’s numbers may be quite different after the event. To understand where this data came from, see the snapshot of the OptionsHouse Probability Calculator below. The “$23 up or down” that I highlight on the bell curve above comes from the options implied volatility on the Probability Calculator. Option markets are putting an expectation of 30% volatility into the May options that suggests the stock will likely move up to, but not more than, 8.7% (higher or lower) in the 31 days to expiration. Since the 30% is an annualized number, the Probability Calculator breaks it down into a standard deviation of 8.7% for the next 31 days. And 8.7% of $247 is about $21.50. This is just a screen capture of a small part of the actual Probability Calculator, which is an interactive tool that allows you to input a variety of time, price, and volatility variables. You can use the Probability Calculator yourself for free just by signing up for a virtual trading account. It’s one among a handful of great tools for analyzing stock and options strategies in the OptionsHouse Trading Tools suite. The low end of the expected move, $18, comes from what option markets are actually paying in terms of premiums for at-the-money (ATM) puts and calls, often called the “straddle.” In this case, most of Monday and this morning, the May $250 strike call and put—the straddle—were trading for a combined premium of around $18.50. What this means is that option players who were buying both the put and the call of the same strike were willing to pay $18.50 and hope that the stock would move more than that by May 21. Obviously, option players who sell these option straddles are making the bet that AAPL will move less than $18.50 in the next 31 days. Why is the straddle priced cheaper than the implied options volatility suggests? It has to do with some of the complexities of time, interest rates, and option market maker hedging that aren’t important for our purposes here. The important thing we need to focus on is having a rough range for what options markets are expecting. This range of $18 to $23 is a good high-low expectation because option markets tend to be very good at predicting potential price moves on liquid stocks. In fact, option markets are the most liquid pool for risk management and predictions on such stocks because they attract so many of the biggest players, from institutions like mutual, pension, and hedge funds to professional risk takers and option volatility trading houses the likes of Susquehanna, Timber Hill, and PEAK6. AAPL earnings highlights from WhisperNumber.com data * Average whisper number for past four quarters: $1.48 * Average actual earnings for past four quarters: $2.04 * Beat the whisper number in past four quarters by average of $0.52 * Beat the whisper number in past 17 (seventeen) quarters * Last quarter price move +0.04% in one trading day, -5.4% in five trading days following earnings * In past five quarters, Apple has seen price movement (on average) of -0.4% within 1 trading days following their earnings release. * In past five quarters, Apple has seen price movement (on average) of +0.6% within 5 trading days following their earnings release. The positive price movement trend then continues through day 30: * In past five quarters, Apple has seen price movement (on average) of +7.3% within 30 trading days following their earnings release. Apple earnings have historically given investors a positive surprise as they have exceeded investor expectations more times than missed: - Beat whisper: 34 quarters - Met whisper: 1 quarter - Missed whisper: 12 quarters Is the AAPL Whisper Priced In? Two conclusions might be obvious here: 1) AAPL tends not to move too much right after it typically beats earnings, but does so positively in the month afterward. 2) After the $55 (30%) move since early February on stunning iPhone sales and the game-changing iPad launch, this earnings report may be all priced in. And this would fit the typical pattern of little positive price movement in the days following the announcement. It may have to really surpass the whisper number by a wide margin to get investors to feel the stock is only going higher at this point. The Big Question: Where are the iPads? And the bigger question that is probably on investors’ minds is “What are Jobs and Co. doing about touch screen shortages for the iPad and how will this affect the momentum of early sales efforts to dominate the market before competitors move in?” How the company approaches this problem and responds to the follow-up questions in the conference call will determine what happens to the stock. It could become a “sell the news” event because while not being able to meet demand seems like a good problem for a tech company to have, investors expect more from AAPL and a lot of good will and great expectations may already be priced in to shares at these levels. For more on what to expect from AAPL earnings today and subsequent stock price movement based on options volatility, see Jared Levy’s analysis, which includes a chart of recent implied volatility vs. historical volatility… Analyzing AAPL Ahead of Earnings And see these articles for more on AAPL’s momentum and Google’s recent disappointment after it clobbered earnings: 9 Ways APPL Will Dominate Smart Devices GOOG Whisper Number Priced In How to Trade AAPL: Why You Buy the Dips More in Buy and Trade Previously Goldman Sachs (GS) Lessons: 5 Wa... Next IBM Option Collar: Making Money ... 1 Person Talking Add a Comment Jim Speakman - April 22, 2010 at 7:13 pm Flag as Inappropriate It is really hard to trust someone giving trading advise when it is based on a poll of visitors to a site that hardly anyone goes to and when it is based on a “whisper number” that clearly was not what the market expected. Two cent beat? Really?!?! What a joke. Stop relying on whispernumber.com for expectations and someone might trust you. Reply to This Quick Comment Sign In or Sign Up Name (required) Email (Never show! Still required) Free Premium Options Trading Alerts when you sign up (it takes 2 minutes) Submit Cancel Notify me of followup comments via e-mail Be constructive! ONN reserves the right to delete any offensive comments! Want Higher Returns? Higher returns with less capital. It’s called leverage and options have it—stocks don’t. Learn more: New to Options Glossary Tutorials Trading Tools How Options can Help Stock Traders Make Money Latest Trading Ideas Hewlett-Packard (HPQ) a buy before back-to-school? 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