A lot of good observations here. Personally, I'm using the low volatility to do that other thing with options, you know, use them to hedge.
Adam
· 5 months ago
yeah, not a bad idea. Certainly a great time also if you have a win on a straight stock long to switch it to a call long.
karlk
· 5 months ago
When I was actually WORKING in the business, and my 7 and 24s were still worth more than the paper they were written on, I was in a meeting with one of the "old wise men" of the firm. Someone remarked that market had hit bottom.
The old wise man remarked (think Gandolf with a buzz cut):
"Don't ever think it can't get any higher, because it can. And don't ever think it can't get any lower. Because it can."
Alas, like most words of wisdom, the import is existential, not actionable.
So, I'm selling spreads as the words echo in my head.
Adam
· 5 months ago
lmao, good words of wisdom
anysunday
· 5 months ago
switching subjects to an old fave, C and the preferred conversion/synthetics. a huge slug of preferreds are finally getting converted to common, I believe by Jul 29. ratio is still x7.3.
So... the Pfd AA (listed as C-PP by most brokers, go figure) is going to convert, fully. it's gradually risen to close the arb gap over last few weeks, trading around 19-19.50. conversion with C at 2.70 is 19.70. no muss, no fuss.
today C-PP opens below 10, and then moves to around 16. at noon it's still about 20% below conversion that is happening within a week. wtf?? implies a 2.20 price on the common in 5 days, which I suppose is possible, but all the arbs shorting the common vs the pref would be covering, no?
I have a small C-PP position and will see what I get. maybe 4 seats at CitiField as compensation?
Procol
· 5 months ago
wow. I just noticed the C prefs bungee jump. Ok.
I believe its too late to buy for tender. So these are trading EX TENDER.
Thing is, could you have simply shorted yesterday and banked? I think there are complications with that , anyone care to chime in?
anysunday
· 5 months ago
you're right, I finally saw these went ex today. so anyone who didn't tender is SOL, they won't get paid divs anymore.
the trust preferreds are all trading down in sympathy. but these continue to pay divs, yielding around 10.5%. C-PRR, C-PRS etc. decent return if they climb back toward par and the divs continue. risky of course but with the govt in control of C what can possibly go wrong??
Adam
· 5 months ago
yes, we're safe now!!!!
...OK, as to shorting ahead of tender, not sure that actually works in that don't you have to deliver the shares regardless? In other words, I don't believe it's like being short calls and hoping they don't get exercised.
Procol
· 5 months ago
This is a subject I;ve tried to get a handle on for years.
The prefs were available to short. Seems too good to be true, but I dont think theres an 'automatic' deliver of the conversion.
This is where it pays to be hooked into a house like GS, who knows such things. Maybe you can ask around and get a straight answer. In any case, the swings in the prefs todays were insane. Clearly , an inefficient market, and this is not an isolated case. Preferred shares do crazy stuff all the time.
Adam
· 5 months ago
I'm not sure, but I believe there is an automatic delivery. Shorts don't pair with a long, like with an option, so there's no reason a short will not get forced to deliver the shares.
At least that's my understanding.
MarkWolfinger
· 5 months ago
Or combine vertical spreads with calendar spreads to create the double diagonal.
All Comments
The old wise man remarked (think Gandolf with a buzz cut):
"Don't ever think it can't get any higher, because it can. And don't ever think it can't get any lower. Because it can."
Alas, like most words of wisdom, the import is existential, not actionable.
So, I'm selling spreads as the words echo in my head.
So... the Pfd AA (listed as C-PP by most brokers, go figure) is going to convert, fully. it's gradually risen to close the arb gap over last few weeks, trading around 19-19.50. conversion with C at 2.70 is 19.70. no muss, no fuss.
today C-PP opens below 10, and then moves to around 16. at noon it's still about 20% below conversion that is happening within a week. wtf?? implies a 2.20 price on the common in 5 days, which I suppose is possible, but all the arbs shorting the common vs the pref would be covering, no?
I have a small C-PP position and will see what I get. maybe 4 seats at CitiField as compensation?
I believe its too late to buy for tender. So these are trading EX TENDER.
Thing is, could you have simply shorted yesterday and banked? I think there are complications with that , anyone care to chime in?
the trust preferreds are all trading down in sympathy. but these continue to pay divs, yielding around 10.5%. C-PRR, C-PRS etc. decent return if they climb back toward par and the divs continue. risky of course but with the govt in control of C what can possibly go wrong??
...OK, as to shorting ahead of tender, not sure that actually works in that don't you have to deliver the shares regardless? In other words, I don't believe it's like being short calls and hoping they don't get exercised.
The prefs were available to short. Seems too good to be true, but I dont think theres an 'automatic' deliver of the conversion.
This is where it pays to be hooked into a house like GS, who knows such things. Maybe you can ask around and get a straight answer. In any case, the swings in the prefs todays were insane. Clearly , an inefficient market, and this is not an isolated case. Preferred shares do crazy stuff all the time.
At least that's my understanding.
http://tinyurl.com/ny9lt6