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.
As of Wednesday morning Morgan Stanley's and Oppenheimer's were under water
Most sell-side Apple (AAPL) analysts are conservative in their earnings estimates but bullish in their price targets. According to Thomson/First Call, the Street high target this week is $700 and the median is a dollar short of $600. (The independent analysts are even more optimistic; the biggest number we've seen is Robert Paul Leitao's $790.)
But with Apple topping $525 in heavy MOREPhilip Elmer-DeWitt - Feb 15, 2012 10:48 AM ET
Its P/E ratio hit 13.97 Monday, lower than at the depth of the 2008-2009 meltdown
Reader Travis Lewis points out that after Monday's $20.41 (5.8%) drop, Apple's (AAPL) price-to-earnings ratio has fallen below the low point set on Jan. 20, 2009 -- six days after Steve Jobs announced his second medical leave -- when the stock closed at $78.20.
To make the comparison, Lewis had to go back to Apple's non-adjusted earnings MOREPhilip Elmer-DeWitt - Aug 9, 2011 7:21 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
New evidence suggests that since last summer the tail has been wagging the dog
If you're any kind of Apple (AAPL) investor, you should be aware of the chart at right, even if you don't know a put from a call and don't really care to.
It shows the value in millions of dollars as of Wednesday morning of the outstanding Apple options that expire this Friday, with the magenta bars representing MOREPhilip Elmer-DeWitt - May 18, 2011 7:36 AM ET
If you're looking for evidence of manipulation, Friday's close was picture-perfect
"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 MOREPhilip Elmer-DeWitt - May 15, 2011 9:32 AM ET
|America's economic mobility myth|
|Stocks: Where to make money in 2014|
|Snowden docs had NYTimes exec fearing for his life|
|Treasury closes the book on GM bailout with final stock sale|
|Victoria's Secret model wears 3-D printed wings|