Why Tompkins Financial Is Not A Good Dividend Play [View article]
Good point there. TMP actually expects the merger to be accretive in the first year. However the arbs still need to lock the spread by buying VIST and selling short TMP. So in the near term (next few months) I don't expect TMP to go any higher than $42-$43. That being said, a buy at $39-$40 should be profitable if you can hold 6 months or even a year, and if the overall economy continues to improve.
Why Tompkins Financial Is Not A Good Dividend Play [View article]
That is exactly what I am saying. People who just want to jump in right before the dividend, collect the dividend and get out, risk losing at least $3 just to get that $.36 dividend. Long term investors need not worry about daily or monthly gyrations.
Low-Risk Opportunity In Piedmont's Tender Offer For Crescent Financial [View article]
Several Updates: I unloaded my entire position last week in the low 60's. That's about 30 cents profit. Meanwhile it no longer looks certain that the offer will be oversubscribed. On Nov 22 Piedmont extended the tender offer until December 12th to give shareholders more time to tender. As of Nov 21 only 3% !!! of common stock was tendered. The offer was extended again on Dec 9 to expire Dec 21st 5pm, since by Dec 8th just 31.7% of outstanding shares had been tendered.
Low-Risk Opportunity In Piedmont's Tender Offer For Crescent Financial [View article]
Connor, you bring up a good point. However, my article is concerned with the likelihood of the deal going through and not with the post-tender value of the stock nor with how to structure the trade for maximum profit. It is impossible for the deal to be subscribed at 100% as continuing directors are not allowed by law to tender their shares. Also Piedmont reserves the right to buy the remaining shares at some point in the future, so some shareholders may hold their shares with even higher future gains in mind. That being said I agree that the tender offer will be oversubscribed - the question is by how many shares ? Obviously the more oversubscribed the offer is the more of their tendered shares shareholders will get back.
Risk arbitrage often involves trading pairs - buying the target company and selling short the acquiring company. This case is not so different. You need to buy some shares of CRFN and tender them and also sell short some shares of CRFN to hedge. Whether you short 10%, 20%, or 30% of the number of shares tendered will be up to your best guess of how many shares you will get back post-tender. The more shares you short, the more protection you get, but you will also be leaving some profits on the table if say you shorted 30% of shares tendered but you only get 20% of those shares back. As there is no way to accurately forecast the number of shares tendered, any number will be a guess and for that reason I have not included any speculation about that in the article.
Time To Take Profits In Renaissance Learning [View article]
I wrote this article around noon on Friday. While it was being reviewed by SA editors, news broke out that U.S. District Judge Barbara Crabb in Wisconsin has ruled to allow the shareholders vote on Monday. PR Newswire press release here : http://prn.to/oi8JK6
Using Stop Loss Orders to Protect Yourself While Letting the Move Run Its Course [View article]
The stop loss order is only in effect during regular market hours 9:30 EST to 4pm. If your stop is at $12 but the stock opens at $10 the next day, your stock will be sold "at the market" - at $10. However stocks normally open within .5 to 1% of the previous day's close(up or down.) For a stock to open down 20-30%, a "black swan event" must happen like you said. There has to be a major real event of enormous significance. And trust me, an event that can cause a company to lose 20-30% overnight will not just go away within a few hours. So you're still better off selling your stock at $10. Even if the price does eventually recover to the $12 levels, it may take months or even years, and it is almost certain that it will see levels lower than $10 in the process.
Bottom line : If you bought a stock expecting it to go higher and overnight it opened 10, 20 or 30% lower - it will be painful. But remember : There is something critical that is wrong with that company, (or the country, or the economy - think 9/11 magnitude event) - so the sooner you sell, the better. If you're down 30% in the morning I give it a 50/50 chance you'll be down 40 or 50% within days (remember Enron, Bear Sterns or Lehman)
Using Stop Loss Orders to Protect Yourself While Letting the Move Run Its Course [View article]
The difference between the current price when you send your market order and the price where your shares are actually sold is called "slippage". A slippage of 1-2 cents is common, a slippage of 10c (as in this trade) is pretty rare. In this case it is probably due to my online broker taking a few seconds too long to transmit my order to the exchange. Your worst-case- scenario, where the price can go down from $37.95 to $37 or even $36 within 20-30 seconds is extremely unlikely. Please note that these are 30 minute bars on the chart above.
A stop loss limit order in my opinion defeats the purpose of having protection at all, unless you place the limit price a generous 10-15c below the stop price. Imagine you had a stop loss at $37.95 that turns into a limit to sell at $37.90 or better. As the price was dropping so fast, I would not have been able to sell at $37.90. Then my stock would not be sold until the price returned to $37.90, which in EZPW's case happened about an hour later (see chart), but it may not have happened at all. And now I'm not talking about an unlikely crash of $2 within a minute but a slow steady decline over the next few days, with some rallies even, that just never reaches my limit at $37.90. So I'd rather use a stop loss and sell 5c or 10c (or even 15c) below my stop price, than using a stop limit and risk not selling at all.
3 Rising Stocks I Will Be Buying on a Pullback [View article]
I am familiar with Bill O'Neill's CAN SLIM method, but my trading style is different. I have a much shorter swing-trading time frame and usually hold positions 2 to 5 days for a quick 10-15% gain. So in my time frame the trades worked. For example, WAB had a pullback down to $66, tested that low again a few days later, formed a big volume up day on April 19 (my buy point) and then moved higher to $72.40 within a week. I encourage you to follow my real-time trading alerts on my website www.bigboxbreakouts.com to see that my trading method works very well.
Why Tompkins Financial Is Not A Good Dividend Play [View article]
Why Tompkins Financial Is Not A Good Dividend Play [View article]
Why Tompkins Financial Is Not A Good Dividend Play [View article]
Low-Risk Opportunity In Piedmont's Tender Offer For Crescent Financial [View article]
Low-Risk Opportunity In Piedmont's Tender Offer For Crescent Financial [View article]
Meanwhile it no longer looks certain that the offer will be oversubscribed. On Nov 22 Piedmont extended the tender offer until December 12th to give shareholders more time to tender. As of Nov 21 only 3% !!! of common stock was tendered. The offer was extended again on Dec 9 to expire Dec 21st 5pm, since by Dec 8th just 31.7% of outstanding shares had been tendered.
Low-Risk Opportunity In Piedmont's Tender Offer For Crescent Financial [View article]
It is impossible for the deal to be subscribed at 100% as continuing directors are not allowed by law to tender their shares. Also Piedmont reserves the right to buy the remaining shares at some point in the future, so some shareholders may hold their shares with even higher future gains in mind. That being said I agree that the tender offer will be oversubscribed - the question is by how many shares ? Obviously the more oversubscribed the offer is the more of their tendered shares shareholders will get back.
Risk arbitrage often involves trading pairs - buying the target company and selling short the acquiring company. This case is not so different. You need to buy some shares of CRFN and tender them and also sell short some shares of CRFN to hedge. Whether you short 10%, 20%, or 30% of the number of shares tendered will be up to your best guess of how many shares you will get back post-tender. The more shares you short, the more protection you get, but you will also be leaving some profits on the table if say you shorted 30% of shares tendered but you only get 20% of those shares back. As there is no way to accurately forecast the number of shares tendered, any number will be a guess and for that reason I have not included any speculation about that in the article.
Low-Risk Opportunity In Piedmont's Tender Offer For Crescent Financial [View article]
Time To Take Profits In Renaissance Learning [View article]
So it seems $16.60 will be the final price.
The End Of The Gold Boom And Resurgence Of Deflation Fears [View article]
How to Detect Potential Chinese Stock Frauds [View article]
Using Stop Loss Orders to Protect Yourself While Letting the Move Run Its Course [View article]
Using Stop Loss Orders to Protect Yourself While Letting the Move Run Its Course [View article]
Bottom line : If you bought a stock expecting it to go higher and overnight it opened 10, 20 or 30% lower - it will be painful. But remember : There is something critical that is wrong with that company, (or the country, or the economy - think 9/11 magnitude event) - so the sooner you sell, the better. If you're down 30% in the morning I give it a 50/50 chance you'll be down 40 or 50% within days (remember Enron, Bear Sterns or Lehman)
Using Stop Loss Orders to Protect Yourself While Letting the Move Run Its Course [View article]
A stop loss limit order in my opinion defeats the purpose of having protection at all, unless you place the limit price a generous 10-15c below the stop price. Imagine you had a stop loss at $37.95 that turns into a limit to sell at $37.90 or better. As the price was dropping so fast, I would not have been able to sell at $37.90. Then my stock would not be sold until the price returned to $37.90, which in EZPW's case happened about an hour later (see chart), but it may not have happened at all. And now I'm not talking about an unlikely crash of $2 within a minute but a slow steady decline over the next few days, with some rallies even, that just never reaches my limit at $37.90.
So I'd rather use a stop loss and sell 5c or 10c (or even 15c) below my stop price, than using a stop limit and risk not selling at all.
How to Detect Potential Chinese Stock Frauds [View article]
3 Rising Stocks I Will Be Buying on a Pullback [View article]
I encourage you to follow my real-time trading alerts on my website www.bigboxbreakouts.com to see that my trading method works very well.