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Posted by Nrg2Nfinit on May-21-2009 02:45:

generally thats the rule with acquisitions. the company that gets aquired gets boosted while the company doing the acquisition takes a bit of a shorterm hit. In this case i speculate the hit is due to share dilution. The acquisition will be made on issuing 88 million new shares which will dilute the equity of WTN. Keep in mind you don't take this as a percentage of the 209 mil outstanding shares since Cambrian's shares will be cancelled. People are saying a 7 or 8 percent dillution is a result of this. I don't know exactly how thats calculated but it must be a fraction of the outstanding shares/cancelled shares and newly issued shares.

IT would have been great to sell today at 1.47. But im waiting till before annual is released. I will probably sell before its actually released because this acquisition might bring their consolidated numbers down (if in fact we see a consolidated balance sheet between the two companies in the comming weeks). Also, Cambrian's financials aren't in the greatest shape from what ive seen.

Posted by Dr. Z on May-21-2009 03:02:

quote:
Originally posted by simms327
So i decided to give this FAZ/FAS option a try

into this:

30 x FAS P JUN 9.00
30 x FAY P JUN 5.00

The prices on these options are even more volatile than the ETF....

Another thing to keep in mind is, options expire, which means that their value degrades over time. A lot of people under estimate time degredation. If your stock is staying flat, or even increasing at a small rate, your call options can still fall in value; whereas your puts fall much more quickly.

Posted by DigiNut on May-21-2009 03:31:

quote:
Originally posted by Nrg2Nfinit
I don't know exactly how thats calculated but it must be a fraction of the outstanding shares/cancelled shares and newly issued shares.

Dilution is minimal due to the fact that Cambrian already had a 34% interest in Western's shares, according to their release.

The dilution isn't so hot, but on the upside, they're also getting back $29 million worth of their bonds.

I could have sold at $1.47, but I have a pretty small stake in Western. It's one of my long-term, maybe-it'll-be-a-five-bagger things. Hell, most of the coal industry has doubled in less than a month, and Patriot has tripled (short squeeze today as I predicted!).

quote:
Originally posted by Dr. Z
Another thing to keep in mind is, options expire, which means that their value degrades over time. A lot of people under estimate time degredation. If your stock is staying flat, or even increasing at a small rate, your call options can still fall in value; whereas your puts fall much more quickly.

Not to put too fine a point on it, but I think this is common knowledge. If options didn't expire then nobody would write them. The point of the FAS/FAZ mock-straddle is that the underlying equities also depreciate over time, making puts more valuable than calls.

Anyway, the depreciation on options for volatile stocks like FAZ is not that significant; fluctuations in the share price itself will dwarf the time dependency. If you'd normally day-trade the equity, it's a reasonable assumption that you'd hold options for a maximum of a few weeks (unless you are playing the decay, in which case you'd likely buy leaps).

Posted by Nrg2Nfinit on May-21-2009 03:58:

quote:
Originally posted by DigiNut
Dilution is minimal due to the fact that Cambrian already had a 34% interest in Western's shares, according to their release.

The dilution isn't so hot, but on the upside, they're also getting back $29 million worth of their bonds.

I could have sold at $1.47, but I have a pretty small stake in Western. It's one of my long-term, maybe-it'll-be-a-five-bagger things. Hell, most of the coal industry has doubled in less than a month, and Patriot has tripled (short squeeze today as I predicted!).

I hope its iminimal though.. i saw it go from 1.47 to 1.37 today lol. The float percentage is up too which apparently should make the stock less volatile.

Lets see what happens.

Posted by dEsidEL on May-21-2009 05:09:

quote:
Originally posted by simms327
FAZ/FAS option

+1

Posted by simms327 on May-21-2009 06:11:

quote:
Originally posted by DigiNut
Holding equal numbers of FAS and FAZ puts makes you pretty bearish at this price differential. Better watch carefully and not wait too long to take profits on some of the FAS puts if the value goes up.
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can you explain why this is excessivly bearish. Two equal and opposite positions, that were (Almost) in the money?

Posted by mute79 on May-21-2009 13:16:

it may be time to get into some inverse etfs.. the market is too heated right now, while the job numbers keep sliding

Posted by exstasie on May-21-2009 13:23:

quote:
Originally posted by mute79
it may be time to get into some inverse etfs.. the market is too heated right now, while the job numbers keep sliding

Are you investing in HIX?

I love that stock symbol lol

Posted by mute79 on May-21-2009 13:41:

no, i think i'll go for the double exposure one

Posted by Nrg2Nfinit on May-21-2009 16:11:

today is a very good day for inverses. everything is tanking

Posted by Skipper on May-21-2009 16:36:

quote:
Originally posted by Nrg2Nfinit
today is a very good day for inverses. everything is tanking

It'll be up tomorrow, or next week..volatility is the new black

Posted by Nrg2Nfinit on May-21-2009 22:32:

this song is required for this thread

Posted by DigiNut on May-21-2009 23:46:

quote:
Originally posted by simms327
can you explain why this is excessivly bearish. Two equal and opposite positions, that were (Almost) in the money?

I wouldn't say excessively, but it is bearish. You have equal numbers of puts, but the FAZ puts are about half the price, so you're 2/3 invested in the bear fund. Assuming all options are at-money, it's the total equity in each that defines your position, not necessarily the number of contracts.

I actually have a few different puts and calls now, just slightly bullish overall, but roughly the same amount in FAS and FAZ. A neutral position would be (approximately) twice as many FAZ puts as FAS.

quote:
Originally posted by Nrg2Nfinit
today is a very good day for inverses. everything is tanking

Was a very good day, right up until about 3:50 PM. Plunge Protection Team haha.

I guess with my current positions I make out better on bull days, but the financials market really didn't deserve that last-minute recovery.

Posted by simms327 on May-23-2009 01:31:

So, i cashed out on the FAS puts, bought at $1.06, sold at $1.50. wow, best return ever. now i need the market to go back up, so i can can move the FAZ puts...

Posted by DigiNut on May-23-2009 03:25:

quote:
Originally posted by simms327
So, i cashed out on the FAS puts, bought at $1.06, sold at $1.50. wow, best return ever. now i need the market to go back up, so i can can move the FAZ puts...

Well played! Since you probably paid about $50 for the FAZ puts, they're effectively free now, so it's all profit, just gotta ride it to the top (or the bottom in this case).

I paid almost $140 for the FAS puts when I got them, so I haven't seen enough of a gap to justify selling yet, particularly with this stupid sideways trading the past two days. Have to admit I'm pretty confused; the last time we saw the RIFIN flatline for two straight days was back in early March.

PCX has still been great for flipping, which has sort of made up for sucky financials. Once it hit $10 it became an options play, was able to make about 50% on some puts.

Posted by DigiNut on May-28-2009 23:06:

So simms, did you cut and run on the FAZ puts now that it got dinged below $5, or are you still holding on?

Looks like you had impeccable timing, could have brought home about 40-50% in under two weeks. Although maybe you're holding out for more.

I've been finding that a position composed of short-term puts needs to be rebalanced at least once a week, at least with the 2 or 3 bizarre flat trading days we had recently. It's doable, but requires a little more TLC than I'd hoped. It seems that it's also possible to combine options with some of the popular day-trading strategies; today I was able to flip a set of FAS calls from $1.00 to $1.30, while adding FAS puts that only declined from $1.00 to $0.85 (arbitrage or just very odd?). Food for thought - if you're comfortable day trading the security, try day-trading the options instead.

-
On a different note - NRG, are you still holding WTN (or did you ever pick it up)? I noticed it arced up to $1.60 today. It didn't falter either, it looked parabolic, so this might even continue into tomorrow.

Posted by Nrg2Nfinit on May-28-2009 23:11:

Overall good day for the markets today.

WTN is up to 1.60 and rim is almost hitting 90.

Banks earnings drove markets up today

Posted by simms327 on May-29-2009 01:54:

quote:
Originally posted by DigiNut
So simms, did you cut and run on the FAZ puts now that it got dinged below $5, or are you still holding on?

Looks like you had impeccable timing, could have brought home about 40-50% in under two weeks. Although maybe you're holding out for more.

No, unfortunatly I paid $1.00 for the FAZ puts... so I am still losing money. I didn't think enough about them when I bought them - so I am holding on.

Recently I haven't had much time to pay attention, work has been hectic, I haven't been able to watch the markets.

Also, I can't make up my mind which way this market is going to move.... every day I have different opinions....

Posted by DigiNut on May-29-2009 02:20:

quote:
Originally posted by simms327
Also, I can't make up my mind which way this market is going to move.... every day I have different opinions....

You're telling me. Although I like this volatility because it makes it possible to day-trade the options themselves. On really wobbly days like today, it's pretty easy to rake in at least 10%.

Well, here's hoping for that bull market! I can't imagine FAZ staying above $4.50 for a whole 3 weeks, even if the financials are starting to run out of steam.

Posted by simms327 on May-29-2009 02:28:

I am thinking that natural gas can pretty much only go up from here, and try to make some money on the 2xlong etf, HNU.

Anybody have any thoughts on this?

Posted by Nrg2Nfinit on May-29-2009 02:46:

it might go down tomorrow just because its friday. people like to cash out then

Look at the daily volume on that ETF its like half the amount of outstanding shares. Super liquid.

Gas has generally been down so it would be risky to go for it. Eventually gas will go up though.. everyone needs gas.

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