Let the Diversification Begin

Just took gains on my AAPL Jan 165 put and closed out that position for $2.79. I also initiated a position in Mosiac (MOS), selling a Jan 2011 50 put for $10.70. I am getting absolutely crushed on that AAPL 210 April call, if the slaughtering continues we'll see if I have the guts to stick to my original plan and double down when the call reaches $9.

Looks like the bears are rounding up the bulls as I speak, my only fear is that it really is the second great depression and this whole thing has been a bear market rally. Wait, the FED will print too much money to allow that, right?

CMG.B no longer

Just as Chipotle said in its last conference call that it was looking into combining the A and B share classes of their stock, today they announced a proposal to turn the B shares into A shares. Pending a vote on Dec 21, hence the 10% run-up in the B shares today, and the A shares about even. A shares sitting at $86.16 and B shares at $83.64.

I think this will be great for CMG's common stock as it will no longer show up on the S&P 1500's most shorted list. All those people shorting the A and buying the B were finally rewarded though.

One More Bullish Play

I just bought a April $210 call on AAPL for $18.25. I just don't think Apple's true earnings power is priced into the stock yet, especially when discounted for AAPL's $34 billion cash hoard.

Logic behind my reasoning. Current Apple market cap = $186 billion. The Enterprise value of the firm is hence $186 - $34 = $152 billion. Earnings last quarter of $2.85 billion, lets assume that was an above average quarter, even though the holiday quarter should be even better. So, $2.5 billion * 4 quarters = $10 billion in earnings. Still paying P/E ratio of $152 billion/$10 billion = 15.2 when market cap is discounted for cash on hand.

I plan on buying another April $210 call if AAPL dips.

Earnings Domination

Apple blew away earnings expectations. In addition to strong mac and iPhone sales numbers I wonder how much the strong GAAP numbers come from the fact that this is the first quarter that has 2 years worth of iPhone sales "subscripting" into it. Their non-GAAP numbers were absurd!

$2.85 billion in adjusted non-GAAP earnings translates into $3.18 per share, and this is in the non-holiday quarter. If the seasonal bump persists, they could be hitting $4/share non-GAAP next quarter. This could lead to fiscal year 2010 EPS of around $12 or even $13. No analysts have estimates that high right now, I bet they'll continue to play catch up.

Above is Yahoo's recent timeline of average analyst GAAP estimates. Apple beat today's GAAP estimate by $0.40, at $1.82.

VIX 22.5 and A Lesson Learned

Back down to the VIX's traditional range. This is moving up the net value of my portfolio as much as anything else. AAPL implied volatility will really drop after earnings on Monday too.

Confessional about some of the dumb moves I made during my excursion from posting all activity. Wasn't that dumb, but definitely a learning lesson. With 3 weeks until October expiration with AAPL trading at around 185 I bought an AAPL 190 call for $3.85. I held on for a couple weeks and sold the position last week for $3.60. When I sold it AAPL was up around 190, I was right about AAPL's price movement. I had feared that theta would eat away at my long call's value when I bought it, and this fear was realized. I also thought that AAPL would be reporting earnings before October expiration when I opened the position, that's the foolish part. I was thinking the increase in volatility before earnings would make up for the lost time value. Hopefully, last time I make a mistake like that.

Overall, glad I got out with a meager lose. The 190 call is now trading at $2.30 with AAPL trading at $191.28.