I put in a short position for the Dow Jones company, I figure that the reward/risk ratio is huge since DJ won't be going up too much more, and the downside potential of the stock returning to it's previous levels is extremely attractive for shorting. It doesn't look like the Bankroff family has any intention of selling DJ to Rupert Murdoch, and I don't believe anyone else will be making an offer anywhere close to his $60/share unsolicited. Another interesting spin that I've read on the matter, is that this offer by Rupert Murdoch was a publicity stunt for himself and the Fox corporation, to garner major buzz for the new Fox Business Channel which is set to compete with CNBC. He may have known the whole time that this offer would be rejected by the controlling family. Any opinions on this situation and the trading opportunities involved?
You may be right, but you should have bought puts to express your bearish sentiment, which would have allowed you to define your risk. Being short the stock exposes you to the possibilty of another bid for DJ, which could cause it to gap higher through whatever stop you may have in place. Given the current private equity feeding frenzy, it amazes me how anyone can expose their portolio to naked short equity positions, even intra-day. Options here are the only sane play.
I don't know, maybe it's just me but the 65% premium on the offer made for the Dow Jones Co. in the first place was already so ridiculous that I am really not worried about a substantially higher offer coming in. And plus my position on this short is so small compared to my account value, that i'll be able to sleep fine at night knowing that if a higher offer comes in, it won't do too much harm. But, sometimes you have to take those calculated risks to reap huge rewards. And this looks like one of those times.
IF a higher offer does come in, there's going to be a ton of naive people who are going to get hit with margin calls. The people who think $60 is the absolutely the max the stock is going to go to. Options are the way to go with this fire. As another poster said, stop losses are useless here. By the time it kicks in you'll be 30% under water.
Why go against the trend? The trend is somewhat bullish now, so why not look for stocks that might go up? And leave shorts for the next recession.
Stock's going higher. With a $60 offer, murdock already has got some of the Bancroft family on his side. The remaining members can only muster 52% of the vote. What happens if he raises his offer to 65..70..80? At least one of those no voters is going to crack, and thats all they'll need to have the deal go through.
The Bancroft family is not selling to Rupert Murdoch and turning the Wall Street Journal, Barron's etc into Republican Propoganda just like everything else Fox Corp touches. This doesn't have to do with money, if it did then the deal would have been made already in my opinion.
Would you consider beefing up your profit (or reduce the damage) by selling covered PUT 50 May since you are short?