The White Swan

At risk of following the herd, I have a long strategy on Apple. With just about every analyst predicting Apple to shoot through 300, my ideas may look conservative. On the same token, it seems that unless Nasssim Nicholas Taleb is a prophet, there is a negligible amount of risk. The idea is as follows:

Buy January 2011 270Calls at 11.70 a piece
Sell January 2011 220Puts at 12.96 a pop

The strategy will be profitable so long as AAPL doesn't drop under 218.74 between now and January. If it stays between 270 and 220 you'll net a nominal gain ($126/Contract), and if it pops above 270 as several analysts predict, there is potentially unlimited upside.

It might not seem too prudent to be long when so many economic indicators (including my previous post) are short the market, but Apple seems to have been able to defy the broad market -- and with a powerful lineup of new products (I'm typing this from a new macbook pro, which is AMAZING) and no end to the I-pad, pod, phone, mac craze -- I think it's a safe bet.

Bond Market 8/26

The bond market seems to be predicting that the drop in the equities market over the past two weeks is just the beginning of what's to come. To many people it's not news that the bond market can be used as a leading indicator in predicting the stock market, the chart below illustrates how the Dow reacts to rises and drops in the bond market, and how the two have correlated over the past three years.

Bond Market as a Leading Indicator for the Equities Market

This fact, combined with the macroeconomic news in the past several months (Housing starts, Eurozone, Debt fears)  leads me to be bearish on the market in general. There are no sectors that I see escaping a drop of 10% or more from current levels over the next 6 months.