This thread is a good example of why smart money and institutions run the market. A thread that was useful if you read through it and understood the concepts turned into a poor me party when the fat got trimmed.
I don't know how this became about ATM and I, nor do I care.
I'm not insecure, but is is frustrating when I take my morning break to look at a POS equity, run the numbers, provide the numbers, and the get called out. I won't be doing that anymore.....
I didn't say it was a good or bad trade. In fact I said the options route made sense. All I did was show the correlations and second derivatives weren't nearly as powerful as claimed, and the support fell apart completely with multiple variables showing a serious lack in the robustness of the original factor.
I looked at the original CAPEX and depreciation compared to their historical compared to their expected (announced revised) to figure out if the delay in CAPEX was because they couldn't plug the hole or if it was because they could actually delay the project penalty free and thus have the project serve as an option which would dramatically change the way it was valued.
I was trying to help, but then I guess trolls don't want help.
If he used the crystal ball package I gave away this Spring, he would have seen what I was talking about regarding the lack of underlying fundamentals matching the technicals.
If you know the people on this thread, you'd know I'm not talking out of my ass or throwing out large words. Luckily, finance doesn't work in such a fashion. Brisket Fat tried that route, and it showed after about a page.
The ironic part about looking at his trades is that he had has given himself nearly unlimited downside chasing upside potential. ANYONE in the business would see his strategy and scratch their head. You never go naked on a spec trade. IF you decide to trade it, you would go the options route, probably put on an out of the money strangle or puts to protect against volatility. IF he were my family member, I'd take risk of the table by entering into some forward contracts or swaps at a rate that covers the carry cost on any margin, then take the laddered interest and use it every quarter to purchase another option chain or options on a similar equity. If not, you really haven't diversified.
Risk moves from ASSETS to equity and debt. Unlever this bad boy and look at the first 3-4 iterations. First, it's why the Sharpe is so low on this bad boy: little to no compensation for appropriate risk on. Second, retrace the historical equity and debt beta's and you see the market is requiring a much steeper opportunity cost to enter the risk on now then even a month ago. No Bueno.
Finally, if you are going to throw insults, please learn about dividends, what they represent, how they are accounted, why the are a return of equity and not a return on equity. Also look at how the dividend payout ratio impacts future growth potential by reducing the retained earnings of a firm.
When you need a dividend to keep people in a stock, you are borrowing to pay it, and you equity beta and debt beta are both rising, you don't by the equity, you buy out of the money options at next to nothing.
I think the guy wanted to come on here and show how flippant he could trade 10k blocks. Good for him. That's a skinny finger trade for most of the people on here that actually gave advice.
Nice call for a 20% unrealized gain. Either take it and count your chips, or hold on and keep pumping your dividends back into the stock. If you ascertain that portfolio theory is correct, and you have no barrier to entry on a commission level, why would you reinvest the dividend? If the company could generate a higher return on the equity, they wouldn't be distributing it to shareholders unless absolutely mandated by law or because it's the only metric from a valuation standpoint that matches the value. The problem with the second line of thinking is that the increase in DPO will increase D1 at the expense of G, resulting in a higher equity beta since everything flows from assets. Thus, your EPS1 compared to EPS0 will not give a proper number because G isn't constant.
