How options makers manipulate Apple’s stock price

How the market in Apple ‘weeklys’ is rigged
[Via Brainstorm Tech: Technology blogs, news and analysis from Fortune Magazine » Apple 2.0]

If you’re looking for evidence of manipulation, Friday’s close was picture-perfect

Volume rose sharply and Apple’s share price collapsed in the last half hour

“The easiest way to think of options,” wrote The Market Skeptics‘s Eric deCarbonnel in a prescient 2009 post, “is as a type of insurance. Investors pay a premium to protect themselves against sharp swings in the market. If these sharp swings don’t happen, those selling options (option market makers) keep the premiums as profit.”

“In a legitimate free market,” he continues, “every single option market maker would have already gone bankrupt, especially with the volatility over the last two years. Luckily for option market makers, U.S. markets are neither legitimate nor free.”

If he were looking for a case to make his point, deCarbonnel couldn’t do much better than the trade that started last summer in Apple “weeklys” — puts and calls that expire every Friday. As we saw in Thursday’s post, Apple’s (AAPL) share price tends to gravitate with uncanny accuracy toward the closing price that causes “max pain” to option buyers and maximum profit to option sellers — often in a burst of last-minute trading.

In that respect, Friday’s close was picture-perfect.

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It appears that a big reason Apple’s stock is not as high as it should be, and perhaps why its P/E ratio is so much lower for a company growing as fast as it is, could be due to manipulations by a small segment of the financial arena that uses options to leverage their influence.

They manipulate the weekly price of Apple for their own benefit and to produce ‘maximum pain’ for everyone else. People can now predict where Apple’s stock price will end each week purely by looking at the options market, not the stock market.

Average people in the US cannot trade options. You have to demonstrate that you are a well-educated investor to be allowed to trade them. Now we can see part of the reason why – it is not really an open market but one where some are free to manipulate the price. Then throw in the ability of certain media to provide cover by producing fake rumors /just in time’ and you have a hermetically sealed system where they control the stock price of Apple that the rest of us pay – all for their own benefit.

You know something is wrong when people are able to predict the weekly closing price.

2 thoughts on “How options makers manipulate Apple’s stock price

  1. I am so glad that I bought Apple at the beginning. And would somebody please explain to me why Hedge Funds are still allowed?

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