AIG was trading at $2.60 for the sole reason that their was a *HUGE* possibility that the company would be bankrupt within the next *24 HOURS*. This giant risk has essentially been eliminated. Just a few months ago (while we were still in the middle of the credit crisis), AIG was around 50 dollars per share. Who is to say that the dilution of 80% is not figured from that share price? We don't really know, but that would put us at around $10/share. Now, that is a simplistic [optimistic] assumption, because we don't have the details about the warrants yet. But, I do know one thing: the higher the share price, the more valuable those warrants are. And I do believe that the Fed has no interest in owning/running a company like AIG. It seems that later down the line, they will convert their warrants and sell them off for a handsome profit. Meanwhile, I'm keeping my fingers crossed to fetch 7-10 dollars for the shares I have at an avg of around $3.50. Call me crazy, but I think it may be possible. And I don't know if it will be 1 week or 2 years, but the limit orders are in place EDIT: I also want to point out that we should keep in mind that this is a short term (albeit large) liquidity problem. A very informative video can be seen here: http://www.truveo.com/Retired-AIG-Chairman-Speaks/id/1995071003 The former Chairman Hank Greenberg reiterates that AIG is a healthy company from a financial standpoint, it just needs to buy time. The government has provided the liquidity and the time, but unfortunately it came at a price of an 80% stake. --Relleum
You do realize that all you did is sell your 5000 at 4.45 for 2.05. Your neutral now so figure out which direction you want to take and close out the other. Or better yet, close out all and trade something else other than the extremely volatile AIG as it appears, not making negative judgements, that you are trading emotionally and on news that you do not know how to interpret.
now that i read through the details of the bailout I think the common share is pretty much wiped out no? <$1. glad i dont have an overnight position. crazy week.
Agree with all the criticism. Just an investor. Not a trader. I actually still hold both positions since they are in different accounts. The shorts have access to pre market trading. The longs do not. Don't know if this changes your answer. Just though a professional trader might have a clever way to work this. Thanks
I think the people arguing for the 5 to 7 dollar open are just overly optimistic longs. We'll find out soon enough, too bad there is no quote from Tokyo.
I agree it kinda sounds like they are going to be forced to liquidate alot of there assets. Libor +850 thats not a bad rate for the fed if they get it all back, but very high if you are trying to run a financial/insurance company.
Hello, I am sometimes long and short by scalping. It is for different reasons - I want to catch spike to any direction that is too quick to react. Opposite position I am selling on retracement. Works by wild unexpected spikes with somewhat predictable amplitude. Principles are the same. So I suggest to you set TARGETS on both positions /do not use stops/. Because you are reutral, you can not lost more as you did. The only danger is that you will not determinte the turns correctly. In this situation I suggest to you set realistic target on short /you can not allow you run to long side/ - probably somewhere bellow $1 and than wait on bounce in long position. Immediately when the bounce stops sell it /if you do not want keep it long time / For example if you will close short position and 0.75 and long at 1.75 you will be closer to breakeven. Another option is set "attacking" trail stop on both positions and let both run until stopped. I have however painfull experience with it that it is very unprobable set the correct trail, you will be stopped out by stop run at that position that in principe you should keep and so you will end with position losing more and more.
Was looking for details on the warrants for the last hour only to find... there are none. Anyone else think AIG and the Fed couldn't agree upon what "80%" should be, so they decided to let the market react to the news to determine the fair value and will fill in the blanks later? Seriously, does anyone know when / where details will become available?
Incredible. There are people here trying to compute intrinsic value based on share price. I suggest some of you hit the books or examine your logic.
how about if they had to bail out UBS? A Swiss bank. The Swiss could not do it themselves, would need europe and us to help. Either way AIG, UBS, POT there will be many angry election year congressman yell at the FED