FORTUNE -- Travis Lewis, an independent investor who studies the Apple (AAPL) options market, has long maintained that trading in puts and calls has become the tail that wags the underlying securities' dog -- especially for Apple options, the most heavily traded derivatives by volume, and especially since trading in those options went weekly in the summer of 2010.
To test his theory, Lewis began buying and selling Apple shares using what he calls the Poorman's Algo (for "algorithm") and tracking the results.
He explained it in a June 2012 Seeking Alpha post:
"Since Apple always trades more calls than puts, the stock will have to rise as buying bias comes in. Remember... when you buy a call, the seller will buy stock to offset it. This is what brings in the buying pressure. The opposite also has to take place later in the week as you will eventually sell this call. When you sell your call, the buyer of it will sell shares of Apple... In conclusion; people buy weekly calls in the beginning of the week and sell them at the end of the week.
If this is a tradable pattern, you should be able to make money by doing the opposite: i.e., buying the stock at the close of trading Friday and selling it at Tuesday's close, and that's what he did.
Did it work?
According to Lewis, his Poorman's Algo (so-called because you don't need a PhD. to set it up) has paid off nicely for each of the last three years.
See the attached chart for the results of fiscal 2013.
See also: Apple: Even Poormen Achieve Alpha.
More funds got out of Apple than got into Apple in Q2.
FORTUNE -- Big money fled Apple (AAPL) for the second quarter in a row, according SEC filings submitted this week.
Any institution that manages more than $100 million in equities was required by Wednesday to file a form 13f telling the government what shares they bought and what they sold. Although Apple was the institutional investors' most popular holding, according MOREPhilip Elmer-DeWitt - Aug 17, 2013 1:03 PM ET
How an Internet-trained Apple analyst lost tens of millions of other peoples' money
FORTUNE -- In the late 1990s, an ad agency creative director I'll call Joe Smith to protect his privacy bought several hundred shares of Apple (AAPL) at $60 apiece. Last fall, at age 42, he found himself out of work and increasingly dependent on the value of those shares to make ends meet.
Following the lead of a 33-year-old MOREPhilip Elmer-DeWitt - Mar 4, 2013 1:07 PM ET
Betting on a stock this volatile on a day like this is an exceedingly dangerous game
Trading in Apple (AAPL) was halted on July 19 last year, just before the company released its third quarter earnings report. When trading re-opened, the stock immediately jumped nearly $23 (6%). On October 18, when Apple released its fourth quarter earnings, the stock fell more than $33 (8%) in after-hours trading.
So as you can imagine, there's MOREPhilip Elmer-DeWitt - Jan 24, 2012 6:02 AM ET
Buying puts or calls just before the numbers come out is a fool's game
Apple (AAPL) is a company that tends to surprise Wall Street every time it reports its quarterly earnings, usually on the upside, occasionally on the down.
As a result, the stock often makes big moves the next day -- sometimes as much as 5% and 6%.
Given the power of stock options to leverage your investment dollars, you might MOREPhilip Elmer-DeWitt - Jan 15, 2012 8:12 AM ET
Even for a stock as volatile as Apple, Wednesday was a weird one
According to Terry Gregory, who keeps track of such things at AAPLInvestors.net, Apple (AAPL) was set to register its 8th highest close of all time -- $408.25 -- Wednesday before the selling started. By 4 p.m., it had fallen to $402.64 a share, its 19th highest close.
Gregory's one-word comment on Investor Village's AAPL Sanity board: "Ugh."
Subscribers to the theory of MOREPhilip Elmer-DeWitt - Dec 29, 2011 8:24 AM ET
Strike prices range from $335 to $400 as traders scramble to deal with a market in free fall
A hedge-fund trader hoping to make some quick money in Apple (AAPL) weekly options would be hard-pressed to make sense of the chart at right, a snapshot of thinkorswim.com's AAPL options board taken at 10:30 a.m. Monday morning.
The bottom two graphs show open interest in Apple weekly calls (left) and puts (right) as of MOREPhilip Elmer-DeWitt - Aug 8, 2011 11:35 AM ET
In 52 weeks, Apple shares closed within $1 of the so-called Max Pain range 39 times
To ordinary investors, the trading in Apple (AAPL) shares last week must have looked a little crazy. On Monday, when the Dow was up, the stock fell, only to shoot up $9.98 (3.17%) the next day. On Thursday, when the Dow was down, the stock was up $8.62 (2.67%). If Apple could have held on MOREPhilip Elmer-DeWitt - Jun 25, 2011 8:12 AM ET
With the Dow up and no negative news on the wire, the stock fell off a cliff Thursday
Thursday was another one of those bizarre trading days for Apple (AAPL). The stock opened higher, flirted with some prices north of $328 in the morning and made it through the early afternoon without suffering much damage, despite the turmoil in Greece.
Then, at about 1:50 p.m., the volume jumped and the stock fell MOREPhilip Elmer-DeWitt - Jun 16, 2011 3:43 PM ET
Who's behind the weekly Max Pain phenomenon that has become the tail that wags the dog?
In our ongoing quest to understand what part the trade in weekly Apple (AAPL) options plays in keeping the company's stock price from reflecting its performance (see here, here and here), we had a chat the other day with Mark Sebastian, a former market maker at the Chicago Board Options Exchange who posts frequently on MOREPhilip Elmer-DeWitt - May 27, 2011 8:53 AM ET
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