Regarding over or under valued, SIRI trades in a range (generally) of EV/EBITDA not a FCF multiple. I don't find SIRI to be undervalued at recent prices between $3.20 and $3.60. I have a price target of $4.25 but this is 7 months out, and it's a hit, not a fair value. My fair value is roughly $4 and that is where I expect the share price to float near op ex in January 2014. I may adjust this up or down depending on news as it unfolds. I believe SIRI to be buying at or near fair value and have been pleased that the price has not run up. You had mentioned you purchased in a similar area in January at a similar price to SIRI's average purchase price Feb - Q1 call, I believe, as part of your covered call strategy. I would assume you agree, then, that the share price SIRI has purchased at, on average, thus far, has been a good value relative to your share price expectations in the future.
Timothy is welcome to his opinion but I don't think he looked into this enough.
You can attempt to get creative with this too. If you have the capability of selling naked calls you can buy the stock on a dip, sell the top calls on a pop then buy the bottom calls on a dip again.
Or buy the stock and the 3.50's at the same time then sell the $4's on a rip.
Or sell the $4's and wait for a dip to buy the stock and calls....
Safest way, though, is to just get it all done at once. Trying to time things adds risk.
5000 share buy write @ $3.30 writing 50 $4 calls costs $16500 +$37.50 contract fee + $10 trade fee. You receive 16 cents per option which will be used in next portion so I am not including this in outlay.
$16546.50 Out.
50 contract bull call spread buy 50 $3.50 calls for 32 each and sell against them 50 $4 calls for 16 each. When you consider you received 50 X 16 previously on the covered call your net outlay here is only option and trade fees. $75 for the options, $10 trade. Outlay $85.
Total outlay $16631.50 This is $121.50 over simply initiating a long position on 5000 shares.
You now have a covered call, 5000 shares covered by 50 $4 call contracts, and a bull call spread of 50 contracts at $3.50 covered by 50 contracts at $4.
The most simple way to find out how much you have to gain to "break even" here is to take the $121.50 "Extra" you spent on the play as calculated above, and divide it by the share count or 5000 shares. In this case it is actually $0.0243
Now take the two end strikes, $3.50 and $4. DOUBLE the difference (as you are double exposed on the long side between $3.50 and $4) and add it to the lower strike. Your range is $3.50 - $4.50 for profit that exceeds a standard long.
But to figure the range EXACTLY, add that $0.0243 to the low end and subtract it from the high.
This means you profit to a greater extent than a standard long position at option expiration when the share price is between :
$3.5243 and $4.4757
Or to keep it simple, above $3.52 and below $4.47
This is the case if you manage to get the $3.50's for exactly double the amount received for the $4's.
If you receive a credit, take the cash value of the credit, divide by the shares in the position, and subtract that from what would be the $0.0243 above. If you end up with a negative number, for instance let's say you now have a negative $0.05, your range of profit > a standard long is $0 to $4.55. Once the number turns negative, since you have received a credit, even if all options expire worthless your long position remains, and you keep the credit like a covered call and thus keep the premium. The easy way to see this is if you get a $200 credit on the play, and the stock goes to $0, well, you still have $200.
If you end up with a higher positive number, in the case you have a net debit, then your range will tighten. For instance if your net debit results in a value of $0.08, your range of prices where your profit exceeds a standard long pulls in to $3.58 to $4.42
Time will cause this. In a few more weeks this play will require greater net debits, so time is of the essence in entering it. That is why you can play January 2015 calls $1.00 apart vs. playing January 2014 calls only $0.50 apart.
This can be used for any stock you are long that has favorable options, and since you are long the underlying stock and the play is free or nearly free, there is minimal additional risk other than forefeiture of upside gains over the higher strike + difference in strikes.
Hopefully that was straight forward. It all makes sense to me but... I know full well that one person's math can be another person's nightmare lol...
Sirius XM: Trader Makes A 15 Million Share 'Short' Bet [View article]
That actually had nothing to do with SIRI, and was more an attempted play elsewhere. While I did enter that play a bit I didn't sell any SIRI to do it. Play ended up being a wash so it went into my SIRI play outlined in the 31% article this afternoon. Just waiting on Tuesday for the funds to work the rest.
Ok had a chance to glance over the SS M4. Not how I would do it (I need graphs and such) but I see what you've done here.
I'll dig more into it over the weekend. Complex strategies are simply a mix of straightforward strategies each with a simple equation so it should be possible to create something where values are entered and a product / graph is spit out. It's all up in my head.... just gotta get it down in a functional sheet.
Sirius XM: Trader Makes A 15 Million Share 'Short' Bet [View article]
I hope you're right on seeing $4 before $2.90 :) Though I wouldn't cry if $2.90 were hit just briefly... it'd be a wonderful buying opportunity and I know a LOT of people waiting for that with cash in hand.
I do play around a bit, yes, but I keep most of my position with a long bias. Writing is geared towards, or I try to gear it towards, the longer termed investor.
I would do investors a huge disservice to start speculating on short term moves and trading and whatnot. I've had to read that stuff for years while holding SIRI, and while I have traded the stock here and there or scaled in and out of options I always felt that a lot of investors were getting needlessly scared because of all the speculation and misinformation floating around. As I've said, part of why I decided to start writing.
I'll be the first to admit if I attempt to trade I tend to hold a little too long. But I have a good history of buying near bottoms. For traders, best not to listen to me on the hold out for X part... but for longs, I'd encourage holding until the story changes anyways. The options articles like this one are part of my exploration into maximizing bang for the buck with limited risk and low or no additional capital outlay. I *really* like this play for the average long holder.
So I am in on this play with a small position now. Took opportunity when I could get it and grabbed 3400 shares, sold 64 Jan $4's and bought 32 Jan $3.50's for a net cost of 0 on all the options (16 cents on the 4's x 2 received and 32 cents on the 3.50's paid). Outlay vs. long was simply additional costs due to options.
Nothing major just testing the waters here. But you CAN get this play for transaction costs if you time it right.
Max gain on this is about 36% I think, and is achieved at $4+ per share at end of year. On a straight 3400 share purchase outlay of $11220 / gain of $4080. Would require an end of year share price of $4.48 or so for a straight long position to "catch up" to the gains of this play. Play requires EOY $3.52 to start beating a straight long position.
Anything below EOY $3.52 results in same long gain / loss as straight long - net debit of about $75.
Looking for similar opportunity in the days to come, though as M4 outlined I may seek to find better pricing on the covering portion before initiating the spread.
Sirius XM: Trader Makes A 15 Million Share 'Short' Bet [View article]
No, LMCA doesn't set the price, but LMCA isn't bound to set back at any specific time either. I expect they will sell back at an appropriate time and not during a time when the stock is dragging on the 50.
I get that you like to look and try to guess the day to day (my guess is you are a day trader or at least a swing trader ?) but I'm not writing for the trader as I keep saying. It's probably why I brush a lot of this bearish stuff off... because I don't see short term issues having a long term bearish impression.
I don't see the buyback as a price driver due to buying from the market in so much as I see it as a future benefit increaser and thus a current price increaser due to future expectations. LMCA, or the float, doesn't matter. All that matters is the price SIRI buys at and how many shares, and the expected appreciation of SIRI over the next 5 to 15 years. 5 is far enough to model and was what I used in my example article about a month or two back.
Sirius XM: Trader Makes A 15 Million Share 'Short' Bet [View article]
I remember and I'm glad you held.
I will say, don't look for the stock to zip up to $7 just because it passes $5. If institutions want SIRI they can buy through LMCA (and arguably, they do). I expect no appreciation due to buying just because the stock goes past $5 except in part due to certain indexes which may be required to buy it as a percentage of portfolio guidelines.
Is Sirius XM's Buyback 'Terrible?' [View article]
Is Sirius XM's Buyback 'Terrible?' [View article]
http://bit.ly/178heS5
Is this data wrong?
Regarding over or under valued, SIRI trades in a range (generally) of EV/EBITDA not a FCF multiple. I don't find SIRI to be undervalued at recent prices between $3.20 and $3.60. I have a price target of $4.25 but this is 7 months out, and it's a hit, not a fair value. My fair value is roughly $4 and that is where I expect the share price to float near op ex in January 2014. I may adjust this up or down depending on news as it unfolds. I believe SIRI to be buying at or near fair value and have been pleased that the price has not run up. You had mentioned you purchased in a similar area in January at a similar price to SIRI's average purchase price Feb - Q1 call, I believe, as part of your covered call strategy. I would assume you agree, then, that the share price SIRI has purchased at, on average, thus far, has been a good value relative to your share price expectations in the future.
Timothy is welcome to his opinion but I don't think he looked into this enough.
Sirius XM: Get 31% Upside In 2013 [View article]
Or buy the stock and the 3.50's at the same time then sell the $4's on a rip.
Or sell the $4's and wait for a dip to buy the stock and calls....
Safest way, though, is to just get it all done at once. Trying to time things adds risk.
Sirius XM: Get 31% Upside In 2013 [View article]
5000 share buy write @ $3.30 writing 50 $4 calls costs $16500 +$37.50 contract fee + $10 trade fee. You receive 16 cents per option which will be used in next portion so I am not including this in outlay.
$16546.50 Out.
50 contract bull call spread buy 50 $3.50 calls for 32 each and sell against them 50 $4 calls for 16 each. When you consider you received 50 X 16 previously on the covered call your net outlay here is only option and trade fees. $75 for the options, $10 trade. Outlay $85.
Total outlay $16631.50 This is $121.50 over simply initiating a long position on 5000 shares.
You now have a covered call, 5000 shares covered by 50 $4 call contracts, and a bull call spread of 50 contracts at $3.50 covered by 50 contracts at $4.
The most simple way to find out how much you have to gain to "break even" here is to take the $121.50 "Extra" you spent on the play as calculated above, and divide it by the share count or 5000 shares. In this case it is actually $0.0243
Now take the two end strikes, $3.50 and $4. DOUBLE the difference (as you are double exposed on the long side between $3.50 and $4) and add it to the lower strike. Your range is $3.50 - $4.50 for profit that exceeds a standard long.
But to figure the range EXACTLY, add that $0.0243 to the low end and subtract it from the high.
This means you profit to a greater extent than a standard long position at option expiration when the share price is between :
$3.5243 and $4.4757
Or to keep it simple, above $3.52 and below $4.47
This is the case if you manage to get the $3.50's for exactly double the amount received for the $4's.
If you receive a credit, take the cash value of the credit, divide by the shares in the position, and subtract that from what would be the $0.0243 above. If you end up with a negative number, for instance let's say you now have a negative $0.05, your range of profit > a standard long is $0 to $4.55. Once the number turns negative, since you have received a credit, even if all options expire worthless your long position remains, and you keep the credit like a covered call and thus keep the premium. The easy way to see this is if you get a $200 credit on the play, and the stock goes to $0, well, you still have $200.
If you end up with a higher positive number, in the case you have a net debit, then your range will tighten. For instance if your net debit results in a value of $0.08, your range of prices where your profit exceeds a standard long pulls in to $3.58 to $4.42
Time will cause this. In a few more weeks this play will require greater net debits, so time is of the essence in entering it. That is why you can play January 2015 calls $1.00 apart vs. playing January 2014 calls only $0.50 apart.
This can be used for any stock you are long that has favorable options, and since you are long the underlying stock and the play is free or nearly free, there is minimal additional risk other than forefeiture of upside gains over the higher strike + difference in strikes.
Hopefully that was straight forward. It all makes sense to me but... I know full well that one person's math can be another person's nightmare lol...
Sirius XM: Get 31% Upside In 2013 [View article]
Sirius XM: Trader Makes A 15 Million Share 'Short' Bet [View article]
Sirius XM: Get 31% Upside In 2013 [View article]
I'll dig more into it over the weekend. Complex strategies are simply a mix of straightforward strategies each with a simple equation so it should be possible to create something where values are entered and a product / graph is spit out. It's all up in my head.... just gotta get it down in a functional sheet.
Sirius XM: Trader Makes A 15 Million Share 'Short' Bet [View article]
Sirius XM: Get 31% Upside In 2013 [View article]
I would do investors a huge disservice to start speculating on short term moves and trading and whatnot. I've had to read that stuff for years while holding SIRI, and while I have traded the stock here and there or scaled in and out of options I always felt that a lot of investors were getting needlessly scared because of all the speculation and misinformation floating around. As I've said, part of why I decided to start writing.
I'll be the first to admit if I attempt to trade I tend to hold a little too long. But I have a good history of buying near bottoms. For traders, best not to listen to me on the hold out for X part... but for longs, I'd encourage holding until the story changes anyways. The options articles like this one are part of my exploration into maximizing bang for the buck with limited risk and low or no additional capital outlay. I *really* like this play for the average long holder.
Sirius XM: Get 31% Upside In 2013 [View article]
Nothing major just testing the waters here. But you CAN get this play for transaction costs if you time it right.
Max gain on this is about 36% I think, and is achieved at $4+ per share at end of year. On a straight 3400 share purchase outlay of $11220 / gain of $4080. Would require an end of year share price of $4.48 or so for a straight long position to "catch up" to the gains of this play. Play requires EOY $3.52 to start beating a straight long position.
Anything below EOY $3.52 results in same long gain / loss as straight long - net debit of about $75.
Looking for similar opportunity in the days to come, though as M4 outlined I may seek to find better pricing on the covering portion before initiating the spread.
Sirius XM: Trader Makes A 15 Million Share 'Short' Bet [View article]
I get that you like to look and try to guess the day to day (my guess is you are a day trader or at least a swing trader ?) but I'm not writing for the trader as I keep saying. It's probably why I brush a lot of this bearish stuff off... because I don't see short term issues having a long term bearish impression.
I don't see the buyback as a price driver due to buying from the market in so much as I see it as a future benefit increaser and thus a current price increaser due to future expectations. LMCA, or the float, doesn't matter. All that matters is the price SIRI buys at and how many shares, and the expected appreciation of SIRI over the next 5 to 15 years. 5 is far enough to model and was what I used in my example article about a month or two back.
Sirius XM: Trader Makes A 15 Million Share 'Short' Bet [View article]
"Your integrity is not just laudable but also, to a degree, brave in the face of liers, fact riggers, half-truth sayers and outright manipulators.
"
Made me think I should change my picture from suspenders to a Braveheart costume :P
Sirius XM: Trader Makes A 15 Million Share 'Short' Bet [View article]
Sirius XM: Trader Makes A 15 Million Share 'Short' Bet [View article]
Sirius XM: Trader Makes A 15 Million Share 'Short' Bet [View article]
I will say, don't look for the stock to zip up to $7 just because it passes $5. If institutions want SIRI they can buy through LMCA (and arguably, they do). I expect no appreciation due to buying just because the stock goes past $5 except in part due to certain indexes which may be required to buy it as a percentage of portfolio guidelines.