How Apple Sellers Got Burned on Facebook
If you took a round-trip from Apple to Facebook to Apple again, it was an expensive trade. Here's the math.
Meanwhile, another high-profile stock, Apple (AAPL) is picking up steam, having gained 9.5% today alone. Given the popular nature of the two stocks and degree of participation they have brought in the market, it is not far-fetched to assume that a sizeable amount of capital has switched back and forth between the two since Friday.
Moving back in time to May 10 -- when Facebook was the hottest thing with a ticker -- Apple opened near the $575/share level and shed just under 8% of its value by the close of May 18, Facebook's IPO.
On Monday, Apple opened at $534.50 per share and by the end of the day it had clawed back over 5%. Meanwhile, Facebook had shed 11%. Tuesday, as mentioned, is a continuation of these respective moves.
For those traders who are making the round-trip from Apple to Facebook to Apple again, their trading has proven expensive. An investor exiting 10 Apple shares at the May 18 open of $533.96, would have had gross proceeds of $5,339.60. Those proceeds would have bought 140 Facebook shares at $38/share.
If by the end of trading session on Monday the investor had a change of heart, he/she would have exited Facebook at $34.03, for gross proceeds of $4,764.20. Entering an Apple trade at that moment would have gotten the investors eight shares. As of the end of trading on Monday, then, the investor would have been down just under 16% in terms of capital, or 20% in terms of Apple position.
The bright spot of such a back-and-forth shift would also have meant that the investor avoided a further ~2% decline in Facebook, and captured ~1% appreciation in Apple.
Editor's Note: This content was originally published on Benzinga.com by Ilir Shkurti.
Below, find some more great ETF and market content from Benzinga:
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter