Hacker News Reader

Comment by barredo | Hacker News Reader

More: http://seekingalpha.com/article/1002601-buy-apple-on-january...

> 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.

View on HN

Keep in mind that anyone can put up an "article" on SeekingAlpha, it's all user-generated. Bleacher Report for finance.

Like anything, 90% of it is crap, but there are a few good articles there. Just don't try to contest dividend growth investing, since they tar and feather people who don't believe in it.

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

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.

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

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.

> is this even legal?

At least this is a stock, not a commodity like ahem oil.

Fairly tempted to put in an order for some AAPL now...

If you actually believe that it's "artificial", then sure. There are hundreds of billions of dollars looking for situations like this, if the money managers actually believed the absurd conspiracy theories. Many HN visitors seems foolishly naive in the belief that a couple of players make the market (clearly because they have a personal interest. Never before have I seen such an interest in the stock market, or this feeling of profound victimization because it doesn't always move in one direction), when there are tens of thousands of very large players in the market, all of which want to screw every other player to the greatest extent possible.

If AAPL were underpriced, there would be enormous buy pressure to the point that it is no longer underpriced.

(Sidenote: Among one of the loudest proponents of the conspiracy theory is John Gruber, who today proclaimed that $500 proved it. Only the article he linked actually said $550. It turns out that there are psychological pivot points that are often hit nearing close. The market is made by people, and people understand and gravitate to emotional numbers)

You might think many HN visitors are "foolishly naive," and I would respond no: HN is instead full of too many people who believe that they're somehow less naive than everyone else.

I'm not an experienced trader, but I know about the efficient-markets hypothesis and that analyses such as this one are often "priced-in" to a certain extent. But when the market opens on Tuesday, AAPL is going to go up or down. "Underpriced" is a measure that can only be fully assessed in retrospect -- if AAPL goes up on Tuesday, it was underpriced tonight.

You're right that there are tens of thousands of large players with billions, all trying to screw each other over. I believe that 100%. But there's still room in there for Joe Normal to buy some AAPL stock. If his hunch is correct, the stock will go up in value and he'll make money. Individual people still make money trading stocks, and it's "naive" to think it's solely based on luck.

It shall be seen what happens on Tuesday. I am not discounting that there are unknowns that will surprise the market. In that sense the market is like betting, albeit based upon hints and rumors and misinformation.

The market is speculative. A lot of people are speculating that Apple's best days are past them -- which is how $9 billion worth of AAPL was sold in the $500 range on Friday -- while a lot of people are speculating that it is still a growth company. Those competing interests set the market price (and FWIW those who bought at $700 -- if they actually still believed in that entrance price, would be doubling down right now for dollar-cost averaging, which itself would pull the price up).

What I said above is not at all what the conspiracy theory is, which is where everyone apparently thinks everything is fantastic and it's going to shoot to the moon and there is no uncertainty or risk, but for options reasons everyone is looking the other way for a couple of weeks/months and letting it slide because something-something-options.

Market manipulation absolutely happens, and it happens a lot. However it generally targets low volume, low cap, low interest equities, or less common instruments like resource futures. It would be incredibly expensive to manipulate AAPL, it being one of the most watched, most traded equities.

Whenever someone pitches me some 'sure fire' deal that will get me 12 - 15% returns for sure, I ask the obvious question which is "Why did all the rich people who have hundreds of people on staff searching to find these deals pass you by so that you could pitch me?" Kind of fun to watch them try to wriggle through the pitch.

Clearly, you should be skeptical of anyone offering a "surefire deal" on anything. Skepticism is healthy and good.

But suppose the founders of Airbnb came to you when they were raising angel money. I'm sure they were convinced at that time (maybe objectively irrationally) that investing in their company was a "surefire deal." They were passed on by Fred Wilson (the equivalent of your "rich person with hundreds of staff"), among countless others I'm sure.

By this point, their returns are certainly far more than 12-15%.

And there risk is higher than 'surefire' :-) I've invested in, been part of, and advised startups so I understand those risks. And, for example when FB stock dropped to 17 I bought a chunk and put a limit order to sell it at $28 (I ended up getting it at 18 and my limit order was purchase + $10) But again, it was a lot riskier than "surefire". When people guarantee results without risk, that is when I say "oh really? and just how do you do that?"

There are lots of ideas, but the tried and true one is 'Ponzi Scheme' :-)

Alright -- I think I understand your initial point now. Definitely agree with everything you just said. Thanks for elaborating.

Wait till earnings announcement. Could be a disappointment.

The way both of you are talking about trading this stock indicates that you both aren't qualified to trade.

But then again - there aren't any tests to pass before one can trade - so trade away.

But remember - you both look like dancing pigeons to professional traders (http://rationalwiki.org/wiki/Skinner_box).

Oh, come on.

It's not hard to make money in the market. It's not hard to see real, after-tax, inflation adjusted gains. Carefully picking companies in a buy-and-hold strategy is a reliable place to park your money for 3-8% growth.

These guys aren't pretending to be day-traders. Looking at fund performance, as I'm sure you know, very very few managed funds beat the market with any consistency. There's too much hand-wavy "the big banks and funds play the little guy as a pawn" paranoia. Yes, you can make yourself a pawn by trying to play Gordon Gecko with your E-Trade account. But cost-averaging into a stock that you chose and believe in is both effective and open to everybody.

And who knows. There are well told stories of amateur investors making literally billions of dollars finding holes in option contracts that the hedge funds and IBanks missed.

Care to share one of these "well told stories of amateur investors making literally billions of dollars finding holes in option contracts that the hedge funds and IBanks missed" ?

http://www.amazon.com/Big-Short-Inside-Doomsday-Machine/dp/0...

None of them were amateurs.

BS. http://en.wikipedia.org/wiki/Cornwall_Capital

They started with $100k pooled together from 3 guys' life savings. How much did they make?

Exactly.

The wikipedia article, short as it is, covers through 2010 when that $100k grew to "100 to 300 Million." Read the latest write-up of them in FT. It's a billion dollar venture now.

Thank you.

> The way both of you are talking about trading this stock indicates that you both aren't qualified to trade. But then again - there aren't any tests to pass before one can trade - so trade away. But remember - you both look like dancing pigeons to professional traders

Professional traders like this cat?

http://www.npr.org/blogs/money/2013/01/14/169326326/housecat...

I already own 10 shares of AAPL way before it went up to 500/700. Not selling anyway. Just saying... I'm not a trader in any way or form.

Thanks. But do you think it'll gap up on Tuesday when markets open?

I don't know. Earning conference call happens at 5pm EST, after the market closes. Just saying that if you're an investor as opposed to a short-term trader, there isn't that much difference between 500 and 550 if it's going up to 1000, and there isn't much difference between 500 and 450 if it's going down to 200.

Of course many people will disagree but hindsight is always going to be 20/20, and many people like to pretend that they know something.

Right -- good call. Thanks for the advice.

Reply on news.ycombinator.com