InfoAnda - Analysis: Apple options - is the tail wagging the dog? |

Pakistanis angry over detentions in Times Sq. case
Monday, May 24, 2010
ISLAMABAD – Relatives of three men detained by Pakistan for alleged links to the suspect in the attempted Times Square bombing say the men are innocent.
They

Taiwan denies boycotting Australian film festival
Thursday, August 6, 2009

AFP - Thursday, August 6TAIPEI (AFP) - - Taiwan's Beijing-friendly government on Wednesday denied boycotting an Australian film festival amid a row over the e

Merkel's support dips, regional ally resigns International
Thursday, September 3, 2009

By Sarah Marsh and Noah Barkin

BERLIN (Reuters) - Chancellor Angela Merkel suffered a double blow on Thursday as a senior party ally in east German

Minister seeks closure of anti-Berlusconi websites
Wednesday, December 16, 2009
ROME (AFP) - – The Italian government moved Tuesday to close down Internet sites encouraging further violence against Prime Minister Silvio Berlusconi, who

Asian markets mixed after Wall Street rally
Wednesday, March 18, 2009

By ELAINE KURTENBACH,AP Business Writer AP - Wednesday, March 18SHANGHAI - Asia's stock market rally seemed to be running out of steam Wednesday, despite an

"Twilight" Leads People's Choice Awards Nods List | 12 November 2009
Jon Stewart, Jim Cramer to take each other on | 12 March 2009
Exclusive: Apple, Samsung chiefs disagree on patent values - source | | 24 July 2012

Nepali parties agree on one thing: No changes in flag | 18 January 2011

Forum Views () Forum Replies ()

Read more with google mobile : Analysis: Apple options - is the tail wagging the dog? |

Edition: U.S. Africa Arabic Argentina Brazil Canada China France Germany India Italy Japan Latin America Mexico Russia Spain United Kingdom Home Business Business Home Economy Technology Media Small Business Legal Deals Earnings Social Pulse Business Video The Freeland File Aerospace & Defense Investing Simplified Markets Markets Home U.S. Markets European Markets Asian Markets Global Market Data Indices M&A Stocks Bonds Currencies Commodities Futures Funds peHUB World World Home U.S. Brazil China Euro Zone Japan Mexico Russia India Insight World Video Reuters Investigates Decoder Politics Politics Home Election 2012 Campaign Polling Supreme Court Politics Video Tech Technology Home MediaFile Science Tech Video Tech Tonic Social Pulse Opinion Opinion Home Chrystia Freeland John Lloyd Felix Salmon Jack Shafer David Rohde Nader Mousavizadeh Lucy P. Marcus Nicholas Wapshott Bethany McLean Anatole Kaletsky Edward Hadas Hugo Dixon Ian Bremmer Lawrence Summers Susan Glasser The Great Debate Steven Brill Reihan Salam Frederick Kempe Christopher Papagianis Mark Leonard Breakingviews Equities Credit Private Equity M&A Macro & Markets Politics Breakingviews Video Money Money Home Tax Break Lipper Awards 2012 Global Investing MuniLand Unstructured Finance Linda Stern Mark Miller John Wasik James Saft Analyst Research Alerts Watchlist Portfolio Stock Screener Fund Screener Personal Finance Video Money Clip Investing 201 Life Health Sports Arts Faithworld Business Traveler Entertainment Oddly Enough Lifestyle Video Pictures Pictures Home Reuters Photographers Full Focus Video Reuters TV Reuters News Article Comments (0) Pictures Meet the iPad mini Apple unveils their smallest iPad yet. Slideshow Follow Reuters Facebook Twitter RSS YouTube Read Colin Powell endorses Obama for second term 2:47pm EDT French Muslims demand group ban after mosque attack 22 Oct 2012 Hurricane Sandy threatens U.S. after hammering Cuba | 3:17pm EDT Analysis: Americans to face tougher 2013 on rising prices, taxes 7:25am EDT White House told of militant claim two hours after Libya attack: emails 23 Oct 2012 Discussed 530 White House told of militant claim two hours after Libya attack: emails 154 After final debate, Obama says election comes down to trust 117 Trump to give $5 million to charity if Obama releases records Sponsored Links Analysis: Apple options - is the tail wagging the dog? Tweet Share this Email Print Related News iPad mini won't upset low-end market: analysts Wed, Oct 24 2012 Apple unwraps mini-iPad to take on Amazon, Google Wed, Oct 24 2012 Analysis & Opinion Apple in miniature Counterparties: Why did markets move? Related Topics Tech » Media » iPad » A visitor looks over the new iPad mini at an Apple event in San Jose, California October 23, 2012. Credit: Reuters/Robert Galbraith By Angela Moon NEW YORK | Thu Oct 25, 2012 1:46pm EDT NEW YORK (Reuters) - As the world's most valuable publicly traded company, Apple's share price rises and falls - mostly rises - on its fat profits and big sales of newly introduced gadgets. That is, except for the last few hours of trading on Fridays when the options market takes charge. Apple Inc, which was worth $578 billion at Wednesday's close, is one of the market's most actively traded stocks. But its options are also among the most popular, too, so the closing price of the maker of the iPad and iPhone at the end of each week is often dictated by players in this market in a phenomenon known as "pinning." That's due to the increasing interest in trading weekly options on individual shares, which have only existed since June 2010. These contracts, known as "weeklys," should be particularly active as Apple reports earnings after the market's close on Thursday. Investors who buy options hope their bets end up "in the money," that is profitable, be it a call option (bets on a stock rising) or a put option (bets on a stock falling). If Apple is, say, at $605 a share, every call option below that level - from $600 down - makes money if the buyer decides to exercise that option. For dealers - those who sell options - the equation is a bit different. They're generally trying to remain neutral - making money by collecting the cost, or premium, from buyers of options. Where the rubber meets the road in this case - and where concern about manipulation comes in - is with option strikes that are very close to where a stock is trading on expiration approaches. For dealers and others selling options, as expiration approaches, their incentive is to try to have these positions expire worthless - so they're not caught having to deliver the shares and suffer losses as a result. That's where "pinning" comes in. Dealers and others will try to "pin" the stock as close to that round number as possible - through buying and selling shares. Professional traders have noticed this trend and attempt to profit by riding the tendency of stocks to gravitate toward a round number. For instance, if a stock was trading just below a $600 strike, they would buy shares to push the price higher, assuming other buyers will jump in, thus giving the trader a quick profit. When stocks end the week close to a strike price, it means investors with a position in that particular strike sees those calls or puts expire worthless. If an investor paid $2 on an Apple call option with a $620 strike, they're hoping it rises to more than $622. If it doesn't, the position is not profitable. "This is a tail-wagging-the-dog phenomena that I think all investors should be aware of," said Ralph Edwards, director of derivatives strategy at Investment Technology Group, who closely watches expiration activity in Apple weeklys. "Traders should get used to every Friday being expiration Friday," said Edwards. WEEKLY PINNING GAMES Pinning has been around for years, especially in S&P 500 index options, but it is becoming more prevalent as options trading has grown in popularity. Traders do it to neutralize positions that could cost them a lot of money. Rising volume in weeklys has made pinning a Friday afternoon ritual. The pinning phenomenon sparks some accusations of manipulation in share prices, but some say it is inevitable. "There is this notion that weekly options are fishy and that pinning is some sort of a hoax, but it's not," said TD Ameritrade chief derivatives strategist J.J. Kinahan. "They are not the bad guys, it's just the nature of hedging," Kinahan said. Weeklys were first introduced by CBOE in October 2005 for index options. Weeklys for individual names started in June 2010, when Apple became one of the first four with such contracts. Now, about 130 individual stocks have weeklys. Apple options are the most actively traded among single-stock names at the CBOE. Average daily volume in Apple weeklys was more than 90,000 contracts for the first nine months of 2012, compared with less than 30,000 in 2011. Apple options contracts are listed in $5 intervals - $625, $630, and so on. Over time, Apple's closing price on Fridays has been drifting closer to the nearest strike as weekly options become more popular. Between October 2011 and October 2012, weekly expiration days saw Apple shares end, on average, $1.02 away from the nearest strike. In the prior year, it was $1.32. "It is the growth of the use of weeklies that have driven the pinning," Edwards said. Friday, Oct 12, was a notable example. Activity in Apple options soared, with around 150,000 contracts traded in the last hour, or about 15 percent of the day's volume, according to Interactive Brokers. The stock was as low as $625.30 but closed at $629.71, right near the most popular options strike of $630. That meant anyone betting shares would fall substantially below $630 saw their bet expire worthless. In July, weeklys accounted for about 18 percent of average daily CBOE options volume, up from 2 percent in 2010. "It would take at least a couple of years for weeklys to top the volume of monthly options that have been around since the '70s, but the growth of these short-dated options is massive," said Randy Frederick, director of trading and derivatives at Charles Schwab. (Reporting By Angela Moon; Editing by Kenneth Barry) Tech Media iPad Related Quotes and News Company Price Related News Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above. Edition: U.S. Africa Arabic Argentina Brazil Canada China France Germany India Italy Japan Latin America Mexico Russia Spain United Kingdom Back to top Reuters.com Business Markets World Politics Technology Opinion Money Pictures Videos Site Index Legal Bankruptcy Law California Legal New York Legal Securities Law Support & Contact Support Corrections Connect with Reuters Twitter Facebook LinkedIn RSS Podcast Newsletters Mobile About Privacy Policy Terms of Use AdChoices Copyright Our Flagship financial information platform incorporating Reuters Insider An ultra-low latency infrastructure for electronic trading and data distribution A connected approach to governance, risk and compliance Our next generation legal research platform Our global tax workstation Thomsonreuters.com About Thomson Reuters Investor Relations Careers Contact Us Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests. NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.

Other News on Friday, 26 October 2012
Pussy Riot got what they deserved: Putin |
Assange says to stay in embassy until U.S. backs off: CNN |
In Myanmar's volatile west, sectarian violence worsens |
Kremlin dismisses talk Putin has back trouble |
Senate intelligence panel to hold Libya attack hearings |
Israel's Netanyahu, Lieberman merge parties for ballot |
Sudan: a front for Israel's proxy war on Sinai jihadis? |
U.N. expert calls for boycott of companies in Jewish settlements |
Russia wants answers on NATO post-2014 Afghan mission |
Amazon reports weak results, shares fall over 5 percent |
Pandora falls on report that Apple in talks for Internet radio |
Yahoo buys mobile start-up |
Panasonic to reduce much of mobile phone business: Nikkei |
Analysis: Apple options
IBM says Commerce Department has asked it about ZTE |
China's Ai Weiwei bemoans block on his Gangnam parody |
UK police to make arrests over BBC's tsunami of filth |
Syrian foes hold fire at start of Eid truce |
Suicide bomber kills 37 at Afghan mosque during Eid |
China paves way for prosecuting disgraced politician Bo Xilai |
U.S. knew too little to deploy troops to Benghazi: Pentagon |
Exclusive: Iran's coal shipping trade booms despite Western heat |
Chinese premier's family has massive wealth: NYT report |
Now military corruption scandal clouds China succession |
U.S. diplomat chides Japan over revolving-door politics |
Gunfire as Syrian forces disperse protests: Observatory |
Apple iPad sales disappoint, Street eyes the holidays |
LG Display posts first profit in two years on phone, tablet panels |
Samsung says to book patent provisions after U.S. ruling |
Taiwan's HTC sees lower revenue, margins in fourth-quarter |
Panasonic may cut mobile unit, post writedown: sources |
German publisher Burda makes offer for social network Xing |
Tech CEOs trade barbs, warm up for holiday tablet wars |
Samsung posts $7.4 billion profit, handsets mask weak chips |
Amazon reports first quarterly net loss in years |
Rolling Stones play $20 surprise gig in Paris |
Tori Amos puts new spin on old songs for Gold Dust |
Shot Pakistani girl recovering fast in UK: father |
Italy's Berlusconi sentenced to jail for tax fraud |
Britain restates opposition to military strike on Iran |
Ex-Soviet summit postponed amid worries over Putin's health |
With rival jailed, Ukraine president seems set for election victory |
Belarussian opposition leader granted UK asylum: wife |
Nigeria president says floods won't cause hunger |
Belgian prosecutors study murder of Exxon executive |
Brazil hit by new blackout, infrastructure in spotlight |
NY man who sued Facebook faces criminal charges |
Apple's weak margin outlook surprises analysts |
Citi fined $2 million by Massachusetts over Facebook IPO |
China ministry probes Qihoo browser over blogger complaints |
Iranian lawyer and filmmaker win EU's Sakharov Prize |
UK police to make arrests over BBC's tsunami of filth |
Greece at new risk of being pushed off euro
Bodies of missing Tenn. mom, Jo Ann Bain, and daughter found
Female Breasts Are Bigger Than Ever
AMD Trinity Accelerated Processing Units Now in Volume Production
The Avengers (2012 film), made the second biggest opening- and single-day gross of all-time
AMD to Start Production of piledriver
Ivy Bridge Quad-Core, Four-Thread Desktop CPUs
Islamists Protest Lady Gaga's Concert in Indonesia
Japan Successfully Broadcasts an 8K Signal Over the Air
ECB boosts loans to 1 trillion Euro to stop credit crunch
Egypt : Mohammed Morsi won with 52 percent
What do you call 100,000 Frenchmen with their hands up
AMD Launches AMD Embedded R-Series APU Platform
Fed Should not Ignore Emerging Market Crisis
Fed casts shadow over India, emerging markets
Why are Chinese tourists so rude? A few insights

USD EUR - 1 year graph	VPN on MacOSX	BlogMeter 1.01