Al Gore teaches us some nice AAPL stock tricks

By , Jan 18, 2013

All Gore (AllThingsD 001)

I also have another headline: Al Gore profits from Apple losses. Regardless of where you stand, the debate over whether Apple’s iPhone is facing declining demand has now spread from simply a question of iOS versus Android. It’s about Benjamins, who wins and who loses. Facing the ‘threat’ of Apple share value rebounding when its quarterly sales numbers are released next Wednesday, investors are hoping the company’s stock remains low. Among them: former U.S. Vice President and Apple board member Al Gore.

Gore last week exercised options to buy 59,000 shares of Apple stock for only $7.475 per share. Because of the low option price versus the actual stock price of $495.2, he was able to buy Apple stock worth more than $29 million for just $441,000…

“That’s a steal even at today’s slightly-deflated-from-peak prices”, remarks The Next Web.

The SEC published the filing today.

Although outrageous, that news has brought the conversation around to how Wall Street gambles with the fate of companies. But instead of wagers, traders use terms like “calls” to indicate bets placed on stock prices. All of which is making some observers call foul, alleging stock manipulation.

“The whole cutbacks narrative is a fig leaf for stock manipulation”, writes one commentator in a story Christian filed earlier today. “Options expiration is the reason for this massive decline”, he charged.

apple_shares

In November, many traders purchased AAPL stock with options expiring today.

Many of the shares expiring today had a “strike” (expected price) of around $550-$600. Institutions which offered the calls for investors lose money if the price of Apple’s stock rises today.

Here’s how Fortune explained the process in July:

You buy Apple at $606, say, and write a September call exercisable at $640. If Apple doesn’t go up very much the option expires unexercised and you pocket the $15 premium. If it does shoot up you have a $34 capital gain plus the $15.

Another way of looking at was presented in November by the stock analysis site Seeking Alpha:

What kind of money are we talking? Let’s use the more than 60,000 calls with a $600 strike price. If Apple goes to $700 before January 19, then those options have an intrinsic value of:

60,000 (call options) X 100 (shares per option) X $100 (intrinsic value per share) = $600,000,000

However, if Apple shares stay depressed through Jan. 19, then rise next week on word of more gangbuster iPhone sales, the companies which sold the calls and bought the shares to cover those calls get the money from the difference and the money for which they sold the stock call.

And everything is going on schedule: Apple’s stock is near $499.

How much you wanna bet come Monday, Apple shares are much higher?

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  • http://twitter.com/rydogg23 Ryan

    Buy a share of stock or an iPad.

    I’ll take the iPad

    • http://twitter.com/Tuanvy512 Tuan Z

      But then your ipad won’t just pop out an iPad case. If you buy 1 share now, you will have an iPad with a case(hopefully a really good case) by next week.

  • SirPsycho

    What does Al Gore exercising his options as a board member have to to with the options exchange? Nothing. A board member’s, or employee’s stock option plan have nothing to do with the options exchange, not to mention you only poorly try to explain “call” options and no other types of options.

    Further more, to claim that investor who issued calls would lose money is ridiculous. Unless of course they learned about stocks and investing from this website. No one is going to issue a call below the price they paid for the stock and if the stock rises above the call price they would simply buy more stock when it reaches the call price, or better yet buy some calls at a lower price just in case. What about “puts”? You make no mention of that which would give you a far better look at where investors think Apple stock is going.

    C’mon guys, stick to writing about what you know about instead of trying act like you know what you writing about.

  • http://twitter.com/JFBD Joseph Duffy

    Forbes has a much better article on the subject. http://www.forbes.com/sites/igorgreenwald/2013/01/18/dont-hate-on-al-gore-for-his-big-apple-score/

    As SirPsycho already mentioned, Gore received the options (the opportunity to purchase) the stock at such a low price because he served on the Apple Board of Directors for the past 10 years. No one, no matter how much you know about investments, can possibly get that price without being on the Board. Gore is not teaching anyone anything about investing here.

  • ohjk

    Ill bet all the money in the world that share arent higher on monday.

    Because the market isnt open on monday.

    Stick to iphone news guys

  • Kurt

    al gore is still one awful human being

    • Mohammad Ridwan

      the republican talk show host’s got to you…