I'm short a bunch of naked puts on AAPL, Feb 13 $505's, B/E a little under $485.
A sub-$500 BE has seemed like a no-brainer for a while given the $600+ stock price, and especially in the pre-Ipad-Mini and slightly-before-iphone5 days... And upcoming holiday sales seemed like a solid catalyst to take the stock higher or at least support it....
With the past weeks of activity though and especially the past couple days... Suddenly the $505 strike on those puts is fast approaching. Given the Feb expiration, certainly there could be plenty of time for Apple to regain some footing if this "moment of weakness" is short-term. But the risk of AAPL dropping past that level and not coming back for a long while suddenly has me concerned since I'm naked on the Puts. Earlier this year the stock was between $400 and $450, and there was a lot more bloom then on the Apple rose. Suddenly a return to $450 doesn't seem far-fetched; what does the stock have (or not have) now that it didn't have at $450, other than a lot of negative market sentiments about recent products and Apple's future pipeline?
Could use thoughts/advice on either of a couple angles...
(1) General thoughts on Apple (given my specific position). Typically I have an iron stomach & hold through weakness, occasionally to my detriment, but suddenly I'm just not seeing anyone want to step up to buy/support Apple right now and it worries me for the position I have. I'm still sleeping ok though for now.
(2) Thoughts from the more experienced options traders on options strats I could be considering that might add a little comfort. Rolling these out further/lower has occurred to me, but I wonder about the dangers considering how far Apple could fall.
I think at the end of the day, Apple is a cash-generating monster and has a great eco system. But investors are still adjusting to the realization that, absent any big surprises, Apple is transitioning from a highly innovative growth co to a blue chip.
Add the exogenous risk of continued sell-offs for tax purposes (plus the larger fiscal-cliff fears, for that matter) and the fear inspired recently by lack of support for the falling stock price.. And we get a stock that I'd feel better about if I didn't have any positions in for now.
So, I bought back my puts this morning while Apple is slightly in the green. Took a loss with a little sting, but not big in the scheme of things. The stock can go where it may but I'll stick with my conviction of mainly staying in cash for the rest of 2012, or until there is more transparency on some of the bigger issues confronting us.