No Nonsense Sirius XM November Thread

[William_B]

Hello Waldo it appears my question earlier did not post for some reason. What strike and expiration did you choose for your hedge?

[midas360]

William_B where are you from exactly... I find it interesting that you mentioned Faulkner and his "Hamburger" article?

Hello Waldo it appears my question earlier did not post for some reason. What strike and expiration did you choose for your hedge?

[waldo29]

Hello Waldo it appears my question earlier did not post for some reason. What strike and expiration did you choose for your hedge?

WB,

Sorry about that, I should have mentioned that. Jan 15th 2016 calls, 4.00 strike. I am still working on it, not a lot of vol on that strike yet today. Unless it loosens up, it may end up taking multiple days. I'll try to post when I finish the hedge.

Edit: I expect the HS news to come before the exp, probably in short order.

[William_B]

Hi Midas I am from the internet much like food is from the supermarket.

My physical self can be found between NYC, VT and Austria.

I disagree in that I do not consider myself or what I say to be all that interesting. I tend to be the curious one, by nature.

[midas360]

But you knew about Faulkner?

Hi Midas I am from the internet much like food is from the supermarket.

My physical self can be found between NYC, VT and Austria.

I disagree in that I do not consider myself or what I say to be all that interesting. I tend to be the curious one, by nature.

[William_B]

WB,

Sorry about that, I should have mentioned that. Jan 15th 2016 calls, 4.00 strike. I am still working on it, not a lot of vol on that strike yet today. Unless it loosens up, it may end up taking multiple days. I'll try to post when I finish the hedge.

Edit: I expect the HS news to come before the exp, probably in short order.

Ok I am well versed with options so the idea of a hedge against a $4.10 short when the hedge cost you 17 cents confuses me?

Simply stated being short at $4.10 gives you profit below $4.10 and being long the call gives you profit over $4.17.

Given that together this creates your hedge, your only profit here comes with the stock below $3.93, or your short price minus the call premium paid.

Your hedge simply caps your loss at 7 cents but now you require the stock to drop below $3.93 to profit instead of simple profit below $4.10.

This is a very confusing position. Simply going to cash and covering that short would seem to be the more prudent move instead of carrying a short and paying premium against it for soon to expire at the money options? Perhaps you can elaborate on it? I am always looking to learn from others.

[William_B]

But you knew about Faulkner?

I subscribe to Faulkner's paid service.

[midas360]

Tidbit of information... William Faulkner was the American author who wrote "Light in August", "The Sound of Fury", "As I Lay Dying", "I am Gone, Never Coming Back", "Picking Up Your Ball and Leaving."

[midas360]

@DM

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[waldo29]

Ok I am well versed with options so the idea of a hedge against a $4.10 short when the hedge cost you 17 cents confuses me?

Simply stated being short at $4.10 gives you profit below $4.10 and being long the call gives you profit over $4.17.

Given that together this creates your hedge, your only profit here comes with the stock below $3.93, or your short price minus the call premium paid.

Your hedge simply caps your loss at 7 cents but now you require the stock to drop below $3.93 to profit instead of simple profit below $4.10.

This is a very confusing position. Simply going to cash and covering that short would seem to be the more prudent move instead of carrying a short and paying premium against it for soon to expire at the money options? Perhaps you can elaborate on it? I am always looking to learn from others.

Np WB,

You defined it correctly and going to cash would be a consideration. However, I don't want to exit the short position at this time and that is key. I can withstand being underwater on the short, and the additional news of the tracking split gives me great deal of 'certainty' of the price of the stock into the split than I had prior. Prior to the news, the exit plan for the short was in the high 3.80's (3.86/3.87). Now, I feel I have an additional price information and a timeframe to play with.

Also, Based on the Thursday/Friday interviews, I now think there is a greater liklyhood a HS deal will get done than I did when the short position was put on. I am taking any risk of a positive (for the stock) HS announment off the table from a pure short position. In fact, with the hedge, I would prefer for a positive outcome. If we get a signing, sell the hedge into it and remain short in to the tracking stock split Q1/Q2. I would likely add to the short position after the hedge is sold if it were to materialize (4.24). If we don't get a HS signing, I am willing to lose some of the premium on the call and ride the short in to the tracking stock split and make roughly the same amount from the pure short prior to the news, basically what I was planning on making from the get go.

I don't plan on owning the option near expiration. Another way to look at it, I think the stock will be much lower than 3.97 in to the split.

There are a lot of ways to play it and make money, except for cash.