 |
GGSAE
Registered: Nov 2003
Posts: 711 |
08-29-08 03:29 PM
Another point I wanted to make regarding fundamentals...i've been told we're about to undergo one of the greatest consolidation periods of all time. Holding short positions in companies that look attractive as a buyout can be a painful 30-40% overnight price shock.
|
| |
|
Edit/Delete • Quote • Complain |
samueldoernte
Registered: Mar 2008
Posts: 92 |
08-29-08 03:53 PM
I agree, buyouts are oh so painful, not as bad as a merger blowout, but close. I was taught to also try to be long the smaller market cap company, another consideration when choosing a bias.
|
| |
|
Edit/Delete • Quote • Complain |
mmmarkus
Registered: Nov 2001
Posts: 46 |
08-29-08 04:01 PM
Talking about consolidation and overnight price shock...in addition to all the P's, PE, PB, PCF....wouldn't the size of market cap be as important, if not more important than anything else to consider?
Being short a small cap like CF against a larger cap like MOS or POT overnight could lead to disaster.
I believe mkt cap is a big factor when considering a L/S bias.
|
| |
|
Edit/Delete • Quote • Complain |
jonnysharp
Registered: May 2004
Posts: 980 |
08-29-08 04:08 PM
Yeah maybe my CF/POT trade isn't so good in terms of risk/reward, interesting stuff abt mkt cap for bias, it does make sense to be long the smaller stock, think i might incorprate that into my trading plan going forward on a discretionary basis.
|
| |
|
Edit/Delete • Quote • Complain |
samueldoernte
Registered: Mar 2008
Posts: 92 |
08-29-08 04:08 PM
I agree mkt cap is important, more important??, depends on the pair I think. A billion dollar mkt cap stock trading at 11 P/B and a 4 billion company trading at book value, who is more likely to get bought out?
|
| |
|
Edit/Delete • Quote • Complain |
yobo
Registered: Jul 2007
Posts: 157 |
08-29-08 04:20 PM
No doubt fundamentals are important. In pair trading their is no easy hard fast rules. The key to success with pairs is the same with any trade. Timing, timing, timing. Whatever criteria you use, you want to be on the right side of the trade.
Personnaly, I have grown to really like pairs because I find it easier to manage the relationship between the too than it is to pick a direction a stock will go. Once a direction is clear, you can always cut bait and let the winner run while shedding the loser. or scalp profits throughout the day
Whatever works best for the trader. My time frames are short so the statistical relationship is more important than fundamentals.
|
| |
|
Edit/Delete • Quote • Complain |
| Receive
an email whenever a new post is added to this thread by subscribing
to it. |
|
|
|
|
