Apple Verizon iPhone?

The latest rumor that added another 2% to Apple's stock price this morning just shows that there are so many more rumors that could move this stock up than move it down.  Another reason besides increasing revenues and profits, that make it more likely that the stock continue on its uptrend.

I have just gotten back from spring break in the Dominican, I highly recommend any of the all-inclusive resorts there if you can get it at a good price.  I knew I'd get a chance to go to a casino, so I bought Beat the Dealer.  It was a good airplane and beach read teaching me the basic strategy and a couple different card-counting methods.  Playing the basic strategy I was able to turn $60 into $150 in a couple of hours of play.  With this basic strategy the house odds are brought down to less than 1%.  I was unable to practice counting cards before visiting the casino, and even if I had I doubt I'd be able to keep up counting with the speedy dealers down there.  They're fast!

Anyways, card counting basically just says that when the remaining deck is composed of a larger proportion of 'high' cards you should increase your bet.  These high cards are 9, 10, J, Q, K.  The idea being that since the dealer must hit any total of 16 or less the dealer becomes more likely to bust.  When these favorable remaining decks arise you should increase your bet.  Seeing as Wall Street is the world's largest casino, I must draw the comparison to Apple's deck of remaining rumors being stacked with high cards.  These high card rumors are more likely to come out and bust any shorts.  Although there are low card rumors that can send Apple's stock lower, I'll take my odds with the deck stacked against the house.

Friday Wrap-Up

I finally decided to chase Chipotle, selling a January 110 put for $10.70.  I am a strong believer of Chipotle's earnings power going forward and wouldn't mind having this as a long-term holding in my portfolio at a price of $100/share.  I'm willing to pay the steep current P/E of 25 at that price because I think Chipotle will be one of the best growth stories of this decade.  That said, I hate to chase after a run-up as big as the recent one, but I see no reason for Chipotle to underperform going forward, so chase I will.  Time will tell if this is a short-term trading mistake.

YTD:

• Portfolio up 15.8%
• S&P 500 up 3.15%

The run up in Apple helped me again.  Mosiac's move up today following Potash's higher guidance also helped my short 50 put be worth even less.

Given that the S&P is the de-facto standard for how to compare portfolio manager's relative performance, I've actually been noticing that there are really three different ways to gauge S&P 500 performance.  The total return of the S&P 500, which includes dividends, is likely a better gauge of how a portfolio manager is doing.  Surely, any manager includes dividends as part of his portfolio gains.  The S&P 500 total return YTD is currently 3.6%.

However, the S&P 500 is merely a metric.  Probably the best way to compare performance is relative to the SPY ETF, adjusted for dividends being reinvested.  Over the next week I'll look for a site that's calculating this, and if I don't find one I'll just calculate it out myself.

Opened Futures and Forex Accounts at TOS

Although I don't anticipate myself doing much trading in either of these accounts (or allocating much money to them), I think they'll be good learning tools

On Sunday night I had to stay up til 4 am finishing up a problem set.  Naturally, as soon as I was done I opened up my TOS desktop platform and to see how the overnight futures and forex were trading.  It's fun to witness how it all pieces together with the price of oil being traded 24/7, how the algorithms/people up at 4am perform the elaborate bid/ask spread dance with much lower liquidity to determine where we'll open in the morning.

I am thinking about taking out a long position on the Australian Dollar, will have to keep watching it for a while.  I might start putting up paper trades in the Australian Dollar and oil futures up here.  However, these seem more like day-trade ideas as they trade almost entirely on technicals.  If the paper trades grow consistently profitable I can see myself allocating 5-10% of my portfolio to swing trading, with the rest locked into my long-term plays.

Can't believe it's already been a year since the market low.  Congrats - the world didn't end!

Friday Wrap-Up

I'm going to start posting my YTD performance every Friday afternoon.  I think it'll be a good way for me to look back and check my relative performance week to week along the way.

• Portfolio YTD - up 12.07%
• S&P 500 YTD - up 2.12%

I'll post post the S&P 500 ytd performance as a reference for how the overall market is doing.  I think I must have some alpha in there somewhere, since my portfolio isn't just beta weighted 6 times the S&P.

Without the AAPL call option bluster in January I'd be doing a little better yet.  O well, put the losers behind and learn from 'em.

I also sold my longest dated option yet today, a 2012 AAPL put at a strike of 200 for $29.05.

Roommate Ups my Apple FY 2010 Q2 Earnings Estimate $0.0000002

That's $2 x 10^-7, or 2 hundred thousandths of a cent.  I was getting a little worried because my roommate came home about a month ago excited about ditching her iPhone for a Blackberry.  By the next day she was already lamenting about how she missed her iPhone.

Yesterday, she'd reached the end of the 30-day limit she could return her Blackberry at no cost.  Drove in the last hour the store was open to return it, forgot her wallet, raced home and back to the store to be sure to get her iPhone.  I have never felt so good about my long Apple (AAPL) position.

Recently I also overheard something particularly interesting as it applies to the smartphone market share front.  I can't pin exactly where or when I heard this, but I know I did - "I don't want to get rid of my iPhone because I'm used to it."  Something I've heard countless people say with 'my iPhone' replaced by 'Windows.'  It's a strange position for Apple to find itself in, but I think they will find it's easier to defend a dominant market share position than convince people to switch.

*$0.0000002 based off of $200 / 900 million shares

Trades Recap

I was a little lazy and didn't post my trades immediately over the past week.  Last Thursday I got a little fearful and sold an April 110 SPY call for $2.50, closed out that position for a $100 loss yesterday at $3.50.  I also adjusted the way in which I'm long AAPL:

• AAPL July $165 put sold for $5, now $2.92
• AAPL Oct  $185 put sold for $13.40, now $10.80

instead of the AAPL July $220 put, which I closed out of for a $300 loss.  Still also have:

• AAPL Jan 2010 $220 put sold for $50.20, now $30.98

I didn't like the risk the $220 July put was putting me under - buying into AAPL at $190 if things went downhill from here.  I'd rather lever up at a lower price if need be, and decrease the risk of being called.  I still have a lot of buying power in my portfolio, so I'm looking to research a couple new long plays.  I really like Chipotle, but don't want to chase - feels just as good to let a winner go if its overpriced (even just short-term overbought).  However, I've yet to find a company I feel as confident about as Apple.  Even with no further sales growth, $220 in January will have Apple selling at an enterprise value to earnings ratio of 15.  Sales are still growing though as Mac sales numbers are coming in very well, and I expect iPhone sales will continue their uptrend following the July refresh.  iPad revenue is just gonna be the icing on top.