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Michael Fuller
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Investing styles - long positions, swing trading, dividends, and short term options.
  • KCG Quick Thoughts On Earnings 2 comments
    Oct 17, 2012 12:51 AM | about stocks: KCG

    I'm writing a quick Instablog on Knight Capital Group (NYSE:KCG) earnings.

    I was asked by a few folks, who know I'm holding a nice sized chunk of KCG, what I thought about the earnings. I never did the analysis to come up with an actual earnings estimate but rather I bought KCG in the $2.50 to $2.70 range based on the following;

    - Jefferies Group (JEF) is smart. I've followed them since the Sean Egan incident and I'm impressed. BTW, thanks Sean, that was a great chance for me to get in cheap, I will continue to use you as a contrarian indicator.

    - The other partners in the consortium also have excellent CEO's who have weathered storms well.

    - The deal would allow the liquidation of the loss, before earnings, and the diluation was already baked in the PPS from the short selling overshoot.

    - The book value is around $4.00.

    - Most of the current 4.00 calls were all sold, when the stock was in a dead cat bounce, just what I would expect a hedge fund to do.

    - Most of the current 2.50 puts happened at the same time.

    In summary, it looks like the trading range is expected to be between 2.50 and 4.00. Two thirds of the loss, was monetized into shares, and off the books for earnings. There was a small period of time (about a week), when trading volume was low for them.

    Disclosure: I am long KCG.

    Stocks: KCG
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  • studio support
    , contributor
    Comments (7) | Send Message
    I see we're in agreement on at least 2 stocks ;-)
    I was lucky enough to get in even lower than you and see nothing but good for future.
    I believe this is another that has suffered from massive panic selling
    granted, the news warranted an initial decline, but this stock was totally hammered.
    With the quality of people/competitors that jumped in to help rescue KCG initially, was a good sign for me this company isn't going anywhere (but up)


    I presume you still hold the same opinion of this stock?
    22 Oct 2012, 01:27 AM Reply Like
  • Michael Fuller
    , contributor
    Comments (285) | Send Message
    Author’s reply » I do, I'm trading around my long position, but the long position is intact.
    22 Oct 2012, 06:30 AM Reply Like
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