Apple shares crack $300 en-route to new all-time high - Page 3

After a spilt, when the stock goes up 1$ in value during the day, you simply have double the jackpot, compared the stock rising 1$ before the splt. I think this has a huge psycological effect. And it might stimulate more and faster trading.

Since stocks are traded within an acuracy of xx amount of cents, there must be a mathematical proof that a lower value in USD per stock means faster up's and downs for the stock. I am not sure what is the lowest value a stock can fluctuate though...is it 0.01 cent?

After all the stock market is dependant on the 24 hour day/night cycle of news and closing times. And on peoples day rythms. (When you wake up you have to notice a change) So there has to be a mathematical effect if the stock fluctuates in barely noticable 0.001 cents or in full dollars. And this effect must affect the daily stock movements ever so slightly.

There has to be some statistics that either prove or disprove this...

It all goes back to the dummy who was angry that Apple hasn't announced a split. Surely we can all agree that there's no reason for that, right?

Dummy? I prefer to be called 'challenged' thank you very much.

I don't think being angry about it was productive however (although it may well have been in humor), I feel it would be an excellent idea for AAPL to split. It is so undervalued and you never know, it may help

I’m so long on AAPL that I don’t really care one way of the other, though if I had to guess I think a 2:1 split will mostly likely happen around 400.

The one I am adamant about when it comes to tech stocks is dividends. I think they are a bad idea due to the volatile nature of the this industry. Note: This is coming from someone lives off dividends from other investments.

The mathematically pure of course will argue had it not split it would have only gone up 50 cents ... but I agree with you totally and I think the butterfly did it.

Interesting to hear you say that. My wife has berated me for years that we are long in a stock i.e. AAPL for high six figures, that pays no dividends. My feelings were as we are in it for the long haul it is better that Apple doesn't pay dividends for the health of the company. This wasn't based on expert knowledge rather gut feeling.

your wife has berated you for years about being long AAPL?

the tech industry is the best of all possible industries.

These last few years her eyes started to widen and the rhetoric calmed down. I was referring to a few years back when friends bragged about their various investments doing so well AND paying dividends. I think most of those stocks are now in the tank thus illustrating Sol's point rather well perhaps? (I refer to dividends not splits here) ... And he is the only one in existence remember

Oops.



In February 2003 MSFT did their 9th split. The next day they paid out their first dividend at 08¢ That was the last split they did. The share price closed at 24.61.

Six months later they did their 2nd dividend, about a year after that they did their 3rd dividend, and a couple months later they did their 4th dividend at a massive $3.08 per share. The stock price on that day was 29.97.

Since then they’ve done dividends every quarter between 08¢ and 13¢ per share. Today MSFT closed at 25.34, up an impressive 51¢ (2.05%).

I think I have a better example for this situation.

In which scenario would you get more attention while in a strip club? If you have one $10 bill or ten $1 bills?

If you give 10 different strippers a $1 tip you will get X amount of attention from each one. On the other hand if you give one stripper $10 you will probably get 3X amount of attention.

In the end you are much better off with 10 $1 bills than 1 $10, which proves my point that a stock split would probably result in a small temporary boost in stock price with little to no lasting effect similar to how $10 spent in a strip club would get you a small amount of attention from some naked girls with no long term boost in your attractiveness to women.

When in doubt use a strip club analogy

I've heard of the analogy between a stock market and a casino. But this one is new.

Sounds way more fun!

You can buy fractional shares of a stock. If you have $100, you can buy .33 of a share of Apple.


Stock splits shouldn't make a difference but in reality the stock market is run buy humans and they aren't purely rational. A split generates excitement and interest. Those things often translate into higher numbers.

Dividends aren't the only way to get income from long stock. You could write calls on the stock you have.

Here is an example -

Let's say you are long 100 shares of AAPL, at say 280. Today the stock closed at around 300 so you are up about 20. You could sell 1 call contract for November expiry at strike price of 330 for 3.35 (today's closing price).

If by the 3rd friday in November, the stock is worth less than 330, you get to keep $330 less commissions. If the stock with worth more than 330, you contract obligates you to sell it at 330 plus the 335 that you collected. As long as the stock is worth less than 333.35 per share, you are in good shape. The risk is that the stock is worth more than that in which case you leave some profits on the table,

Still, it would mean you have made a profit of $53.35 per share. Just wait for the stock to pull back a little and get back in it and repeat the process.

If not, you have just lowered your basis price for the stock.

This is a fairly conservative strategy which you can do from an IRA if you choose to.

Note that options can be pretty tricky so you want to get some education on the subject before you trade options.

Done right, you can potentially collect more than you would have than if it paid dividends.

'Done right' is a loaded term. You can do it 'right' but can the option exercised against you and lose any further upside (as you do point out). You can minimize that by selling a call higher exercise price, but that means lower premium (cash) up front.

If someone is really in the market for income, then they are better of investing in dividend-paying stocks or bonds, rather than a stock such as Apple.

I recommend that everyone stop using car analogies to make their point across and instead, use strip-club analogies. This type of style definitely makes more sense.

Unless you drive your car to a strip club. Double value for your analogy dollar.

On the topic, I saw several references to reverse splits but I didn't see any explanation for why they are done typically, and it's not just a mathematical exercise. Companies do reverse splits when their share value falls low enough that they no longer meet the listing requirements of the stock exchange (which I think is $5.00 on the NASDAQ). Rather than find themselves being relegated to the Pink Sheets, they reverse split the shares.

As for the value of splits, I'm convinced that they have a marginal, temporary psychological affect on a small minority of the least-informed investors. And after all, they are the people who move markets.

That says it all

Apple increases the number of authorized shares available. I don't think they even have enough for a 3 for 2 split at this time if I am not mistaken. You will know when Apple will do a split when they go to shareholders and ask for an increase in the number of authorized shares available. The new shares will be either for a stock split or as an inducement to get SJ to stay

Neal

I looked up the number of authorized shares for Apple and the last I could find was that Apple is authorized for 1.8 billion shares. Presently, there are over 900 million shares outstanding. So as a correction for my previous post, there are enough shares for a 3 for 2 split but not for a 2 to 1 split of Apple stock.

Neal

I did a quick scan of one of my brokerage statements to see how much income I actually made this year on just writing covered calls on AAPL.

If my calculations are correct, I made about $14 per share on the call transactions for this calendar year. It may not sound like much, but at my position size that comes up to about 3 17" MBPs.

On a couple of occasions I got called out, and ended up re-entering the long AAPL position on a pullback. I also do not generally wait till the last minute to cover the short calls so I do leave something on the table, so as to take risk off after most of the move has been made. eg. If the trade is worth 2, I don't mind giving up, say .15 if I can get out early and avoid the risk of some crazy move in the underlying because of some unexpected news event.

There is a caveat to writing calls. This works great on a nontaxable account (like an IRA) since you can get in and out of stocks without having to worry about capital gains taxes or the wash rule. If you have your stock in a taxable account, you may not want to run the risk of being called out and having to pay capital gains, which if you have held for a long time at a low basis price can be pretty substantial.

Anyway, the reason I brought up covered calls is that the original poster had a long term block of AAPL stock that he has a substantial amount of money tied up that generates no income (since AAPL does not pay a dividend) and was getting flack from his wife about it. This way you get to have your cake and eat it too.

I have used this strategy with dividend paying stocks as well, most recently with VZ (verizon), HD (Home Depot), QCOM (Qualcom), WMT (Walmart), and KO (Coca Cola).

If I am going to tie up capital, why not get paid a little for my trouble? Plus this does act as something of a hedge by providing (albeit limited) downside protection.

I should mention that there are times with this is an appropriate strategy (depending on the implied volatility, which in turn affects the option price), and there are times when the risk/reward ratio dictates that you not enter the trade. Timing is important here as the value of the options decay as it approaches expiry.

I don't think it is the listing requirement. A sub $5 stock can still be listed under Nasdaq. I think the reason is that many institutional investors are obliged to divest themselves of the stock when it goes below $5.

But I may be wrong on this

I believe the limit is $1, and in my experience it's the only reason companies do reverse splits.

Yes, it's true the valuation remains the same, but it does have a psychological effect. There are many investors that would never buy a stock over $100.00 let alone $300.00. So.....if it splits say 6:1 and the shares are now $50.00 that will open up a whole new batch of investors that just couldn't buy at 300.00 but would at 50.00 only due to psychological reasons. $300.00 is a big money number. Yes, it's stupid because they could buy 10 at $300.00 or 60 at $50.00 and have the same amount but they just don't think that way. They want to see more shares in their file. 60 as oppose to 10 is more comforting to them. I've told lots of my friends about the rise of apple, but they would never buy in at this going rate but if it split they would. Dumb, I know, but that's the way alot of smaller investors think. Splitting it would bring in a whole lot more people who would never buy at this current price.

Yes, you're right -- it's $1.00. More about reverse splits and maintaining listing compliance on the NASDAQ:

http://www.nasdaq.com/about/FAQsContinued.stm