Apple IncLong
AAPL: Analysis of past splits and the game plan
Updated
i hope this post can help answer some of the many questions around trading the AAPL split, and help validate the game plan for the next 2-4 weeks.
we will use a quick analysis of the past 2 splits for AAPL,
- on the left, the 2-for-1 split from Feb 2005 with black background
- on the right, the 7-for-1 split from June 2014 with dark blue background
(BTW, there's a great FAQ on Apple's Investor's web site about the stock split, make sure you check it out, easy to google :) )
everything else on both charts is kept the same (MA's, indicators) to make the comparison possible and support the analysis
Observations:
--------------------------
- in both splits, a strong "split run" happens as soon as the split is announced. those who traded tech splits before would possibly have already positioned themselves with some long positions couple of weeks ago. should i buy more now? (we're 5 days from the ex-date), honestly i wouldn't do it. i would rather wait for after the split for the next wave up to get in - expect volatility to be super high this week
- in both splits, a strong "take profit" / distribution phase occured within the week after the split - which makes sense - some traders wanted to cash out after the run up - in both splits, this caused AAPL to get into "sell" mode (see the yellow boxes and the Volume Viewer going into red)
- AAPL was more exciting in 2014 (possibly due to strong smart phone market share back then) compared to 2005 -- so the distribution didn't last long, the stock lost only 3-5% of value then picked up again - in 2005, that was not the case and AAPL waited almost 6 months to pick up again and make a meaningful breakout (let's keep this in mind as we try to "read" what may happen this time in 2020, with the market in what seems to be a "euphoric" mode)
my conclusion
-----------------
- with these 2 charts as guide, we can draw our game plan for how to manage our AAPL short-term and mid/long-term positions
- i have both a short term (Sept 440 calls, monthlies) and a long term (stock) in AAPL. both positions added as soon as the split was announced (see the linked posts)
- i will need to close the calls as close to the split ex-date or soon after (so early next week) - and won't hold them longer than that - volatility will be highest until the ex-date boosting the option price, then drop once the split occurs and the new prices are in effect (August 31).
- will hold the stock - may add if price goes down after the split - these are long term holdings -- but i'm going to be super cautious even there as i feel the market has accelerated in an unsustainable way - and i started to believe a big correction is due in the near future.
- your "game plan" may be different, and there are many other ways to play the upcoming action - in call cases, i do strongly recommend you do some research and adjust to your trading style and tolerance.
hope some find this analysis useful (feel free to comment and let me know) - and i hope many TV traders managed to capitalize on this exciting opportunity
best of luck!
we will use a quick analysis of the past 2 splits for AAPL,
- on the left, the 2-for-1 split from Feb 2005 with black background
- on the right, the 7-for-1 split from June 2014 with dark blue background
(BTW, there's a great FAQ on Apple's Investor's web site about the stock split, make sure you check it out, easy to google :) )
everything else on both charts is kept the same (MA's, indicators) to make the comparison possible and support the analysis
Observations:
--------------------------
- in both splits, a strong "split run" happens as soon as the split is announced. those who traded tech splits before would possibly have already positioned themselves with some long positions couple of weeks ago. should i buy more now? (we're 5 days from the ex-date), honestly i wouldn't do it. i would rather wait for after the split for the next wave up to get in - expect volatility to be super high this week
- in both splits, a strong "take profit" / distribution phase occured within the week after the split - which makes sense - some traders wanted to cash out after the run up - in both splits, this caused AAPL to get into "sell" mode (see the yellow boxes and the Volume Viewer going into red)
- AAPL was more exciting in 2014 (possibly due to strong smart phone market share back then) compared to 2005 -- so the distribution didn't last long, the stock lost only 3-5% of value then picked up again - in 2005, that was not the case and AAPL waited almost 6 months to pick up again and make a meaningful breakout (let's keep this in mind as we try to "read" what may happen this time in 2020, with the market in what seems to be a "euphoric" mode)
my conclusion
-----------------
- with these 2 charts as guide, we can draw our game plan for how to manage our AAPL short-term and mid/long-term positions
- i have both a short term (Sept 440 calls, monthlies) and a long term (stock) in AAPL. both positions added as soon as the split was announced (see the linked posts)
- i will need to close the calls as close to the split ex-date or soon after (so early next week) - and won't hold them longer than that - volatility will be highest until the ex-date boosting the option price, then drop once the split occurs and the new prices are in effect (August 31).
- will hold the stock - may add if price goes down after the split - these are long term holdings -- but i'm going to be super cautious even there as i feel the market has accelerated in an unsustainable way - and i started to believe a big correction is due in the near future.
- your "game plan" may be different, and there are many other ways to play the upcoming action - in call cases, i do strongly recommend you do some research and adjust to your trading style and tolerance.
hope some find this analysis useful (feel free to comment and let me know) - and i hope many TV traders managed to capitalize on this exciting opportunity
best of luck!
Note
NB: i see some folks are not clear about the dates when the post-split prices for AAPL stocks and options become effective - it's the 31st august. here's the details copy/paste from Apple's website. no edits from me.
---------------------------------------------------------------
What happens if I buy or sell shares on or after the Record Date and before the Ex Date?
If you sell shares on or after the Record Date (August 24, 2020) but before the Ex Date (August 31, 2020) you will be selling them at the pre-split price. At the time of the sale, you will surrender your pre-split shares and will no longer be entitled to the split shares. Following the split, the new owner of the shares will be entitled to the additional shares resulting from the stock split.
If you buy shares on or after the Record Date but before the Ex Date, you will purchase the shares at the pre-split price and will receive (or your brokerage account will be credited with) the shares purchased. Following the split, you will receive (or your brokerage account will be credited with) the additional shares resulting from the stock split.
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