– AAPL Reality Sinks In Sub-$600 As Option-Overlays Lifted (ZeroHedge, Oct 26, 2012):
…
In english this looks like this:
- Managers were grossly over-weight (in their books) AAPL
- Wanted to reduce weight as AAPL’s weight in index reached peak levels and fundamental cracks started to show
- Last few weeks have seen VWAP sell orders dominating
- BUT – the algos can only clear so much and given the huge breadth of holdings…
- Managers bought Option overlays with both hands and feet (as we noted yesterday) to protect through earnings
- And today – with options open, they are unwinding the protection (implied vol dropping even as stock price plunges) and reducing net long exposure in size (see volume)…
Bottom line – long-only managers will retain exposure (as index trackers) but clearly need to unwind some weight and anyone telling you this is all short-sellers is incorrect – the simple facts of VWAP fades and implied vol dropping suggests its long-exits as the cult of AAPL maybe coming to an end…