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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.

As the public downgrades Facebook (FB) from "history in the making" to "cautionary tale," shares are continuing their second straight daily dive, briefly breaching the $31 level in its first few minutes of trading on Monday.

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 by Ilir Shkurti.

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No positions in stocks mentioned.

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