Stripper Spread Trade VCGH Vs. RICK

VCGH and RICK are two companies who own and operate strip clubs. my Trade for the next 4 months is a spread... beginners may want to try this spread in a 100 qty share increment. Here is my trade?:

I think this is a double AA rated trade with Double D's supporting the bottom line!



RICK sell 2000 @ 22.77 (or higher)

VCGH Buy 2000 @ 4.60 (or lower or higher up to 5.00)

Obviously, I think RICK is over valued and VCGH is undervalued

Hold for 3-4 months or until spread yields 7.20 to 8.00 profit.

At 4.00 profit yield i would offset 1,000 shares each.

Link to thread that brought my attention to the over valued ricks.(imho) THANK YOU

http://www.elitetrader.com/vb/showthread.php?s=&postid=1937267#post1937267

 

Hard to justify a sleeze company having a 25 PE ratio, especially when playboy's is much lower.

 

Here is a chart showing the interaction of the two stocks over the past couple of years.

VCGH is red line

RICK is black line..sell the high one and buy the low one!!

it is the reverse from one year ago!!!!!!!

a year ago you would have sold VCGH and bought RICK!!!!

Look at that chart.. at 22 bucks both are over valued.. at 5 bucks both are undervalued... so now .. you sell over valued (rick) and buy VCGH ( undervalued) .. just don't forget to support your single mom at the strip club one dollar at a time with your profits... I love this trade

 

Don't do this with options, or if it takes longer than 3-4 months you'll get RICK rolled.

 

so basically get short the strong stock and long the weak one. can i do this same thing with palm and rimm? it could yield massive profits?:eek:

 

duh.. no one would do this with options...time value would erode value if it took 3-4 months..
of course you can do this with rimm and palm

 

what about using long and short verticals to offset the time decay? Less deltas would mean less profit, but also less risk.

 

I believe that it could work, but neither stock has options.

 

May 29 , 2008

Rick down 2.5 % (22.32)

VCGH down .2 % (4.57)


Trade is off to a good start!

I do not see a benefit of doing this with options when the price is so cheap to buy VCGH and high to sell RICK

 

looks like ricks cup size is getting a reduction..the spread trade is off to a fantastic start!!!!!!!\


sell rick's 22.77
buy vcgh 4.65

spread=18.12 initial

now spread is 17.05= $1.07 gain