Option Trading the Quintessential QQQs:
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Apple's Second Quarter Guidance and Its Effects on the QQQs
Apple (AAPL) is 12.35% of the QQQs. Therefore, AAPL's price moves influence the daily movement of the QQQs. If the bias to AAPL is to the downside, it tugs on the QQQs upward momentum.
Traders can often get a glimpse of upcoming trade direction by not only looking at a equity's current earnings report, but by also sizing up the guidance offered during the company's conference call.
Let's take a look at Apple's 2nd quarter guidance and search for clues for its recent downward trade action.
“We are pleased to report record March quarter revenue thanks to continued strong performance of iPhone and iPad,” said Tim Cook, Apple’s CEO. “Our teams are hard at work on some amazing new hardware, software, and services and we are very excited about the products in our pipeline.”
“Our cash generation remains very strong, with $12.5 billion in cash flow from operations during the quarter and an ending cash balance of $145 billion,” said Peter Oppenheimer, Apple’s CFO.
Apple is providing the following guidance for its fiscal 2013 third quarter:
• revenue between $33.5 billion and $35.5 billion • gross margin between 36 percent and 37 percent • operating expenses between $3.85 billion and $3.95 billion • other income/(expense) of $300 million • tax rate of 26%
Second quarter 2013 results showed a gross margin of 37.5 percent compared to 47.4 percent in the year-ago quarter. When you see the 3rd quarter projection is on the low side of the 2nd quarter's margin and that it is 10% lower than a year ago, it is understandable that the gleam on the shiny Apple has diminished.