by Travis Johnson, Stock Gumshoe | August 23, 2019 12:21 am
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Travis,
When a consolidation is done, like Equinox, it seems reasonable that the number of warrants are adjusted in the same ratio as the shares. But how is the warrant strike adjusted/determined?
Warrants are not being adjusted. It will take 5 warrants to purchase 1 share of stock
Sometimes the warrants are consolidated, too, but more often they just make an adjustment to the number of warrants needed to buy a share. That’s what they did this time, so you need to exercise five warrants to get one share.
Join the discussion…Sorry Travis. You are correct. I should have more specific about EQX warrants.
Travis
Maybe I lost some of your shorting classes here;) . What’s the rational behind your decision to go Long 1 call at 275 to protect your short?
Instead of other alternatives?
Thanks
Mostly just that it was the cheapest way to
Do something effectively like a 25-30% stop for the timeframe I envision being short. I don’t write much about shorting because it’s risky and lots of people hate even the idea, but can go through it if folks are interested.
I would definitely be interested to read a blog post about shorts and limits. I’m a bit new around here and still have a lot to learn!
Let’s talk shorts…I’d enjoy reading your missives on the topic.
Shorting with a stop loss would also control your capital at risk, so I’m curious about your reasons for not liking that as a possibility.
Just not quite as certain when dealing with a volatile stock — Tesla can jump 30% in a day. Yes, a stop loss on the short side would very likely work… but a hedge makes me sleep better.
Hi Travis
TSLA is going higher but will it last?
I don’t think so..
Anyway I would like to ask you.
What’s the right position sizing for a long call hedge against a 100 stock short selling?..
Thanks to clarify this.
Take the Kweichow Moutai loot & buy some Talisker or perhaps Uigeadail . Best, MJ
Excellent idea!
Travis,
I’m curious that you increasingly doubt the investing acumen of Prem of Fairfax, but hold a company he invests in (Altius). Is he the proverbial “stopped clock that’s right twice a day” on this one?
I worry that Prem is thinking again of trying to make macro bets instead of sticking with a more disciplined value investing strategy, though that’s just a feeling. I think many of the investments he has made are fine… his Altius investment was in preferred stock just a couple years ago, I expect that will work out well for both.
Looks like we may get our KEYS entry soon… all out trade wars time!
Travis, would be curious on your thoughts and ideas on how you plan to navigate these trade wars? How are you managing risk? For example liquidating more and holding cash? I’m currently going 90% cash myself…
I’ve been holding a large cash position for a couple years now, I’m trying not to make macro timing “bets” (because I’ll almost always be wrong on that), but to rely a little more on stop losses and look to (slowly) build long-term positions during weak times.
Mostly hoping to look past the trade wars, but try to be opportunistic with buying.
That 1:5 reverse split in December sure paid off for Eldorado Gold
A rising gold price always helps 🙂
I too was an Altius Minerals stock holder for the long term. But with one of their primary resources getting creamed this year and next, I sold (reluctantly) because there won’t be the normal need for potash this year or next due to the water damage in the US farming areas. Most crops were either not planted or lost due to the floods. Farmer’s that had bought potash and not used it this year because they were under water, will wait and use their stored potash next year. That means lower sales for next year and those that hadn’t bought yet for this year will wait until next year which means they made no purchases this year. I still like Altius’ long term but will wait for the agricultural industry to do some rebounding after next year. Just a thought from an old “Country boy” 🙂
Good point, potash prices have come back down a little bit so far, and there’s also some new supply from mine expansion… will be interesting to see if the US floods are big enough to impact the market for more than a season.
Trade Note: A couple 5G stop losses hit the Real Money Portfolio today…
This morning I closed out two smaller positions as they hit their TradeStops VQ% stop loss triggers on Friday’s close: Ericsson (ERIC) and Xilinx (XLNX).
Both of these stocks have been hit a bit by the trade war shenanigans in Washington and Beijing, and both are in the portfolio because of expectations that they will have a surge in revenue over the next couple years as 5G investment ramps up. Both are stocks in which I don’t have a lot of conviction, however, and both are relatively small and more richly valued than other stocks that I like better, so I’m letting the stop loss pull my shares away.
This is easier to do because I have several other 5G-focused investments that I understand better and for which I see a better valuation picture, and therefore where I have a higher degree of conviction in their eventual success — 5G is likely to be a marathon, not a sprint, and I expect that the 5G plays will have a strong few years, but I am more confident in Nokia than Ericsson, partly because of the strong dividend policy but mostly because of the wider product portfolio… and I am more confident in Keysight and Crown Castle than Xilinx (those aren’t real competitors, but both will be beneficiaries of the buildup of 5G infrastructure… and XLNX should have its best years during the early days of 5G adoption).
Travis, would you buy back XLNX if price drops more or is this one dead in the water for you? I miss out on both KEY and CCI.
I still XLNX has a good opportunity to grow in the next few years with their FPGA chips in both AI and 5G, but the answer to your question is “I don’t know.” I will keep an eye on it.
Why not sail around the 5G problem with and ETF? Like https://www.defianceetfs.com/fivg
FIVG is probably not a bad choice for those who don’t want to do stock picking, though, as one should expect, it has had a pretty rough start (it began trading in March, so is down about 6% while the Nasdaq (QQQ) is up about 6%) — weakness in substantial holdings NOK, ERIC, SWKS and XLNX, all of which I own or like on some level, is certainly a big reason for that.
I also have those stocks in my portfolio. All except XLNX. Good to see you are on board too Travis. What/ when the stall out of rollout?
Hi Travis I have shorted a few companies this year with TD Ameritrade and have not been charged a borrowing fee. I thought the original announcement of the China tariffs would have a negative effect on Dollar General #DG, Dollar Tree #DLTR, Lululemon #LULU, Five Below #FIVE but unfortunately, my shorting did not stop the momentum train. I am going to check with them on Tesla #TSLA to see if there is a borrowing fee. It might have something to do with availability.
Shorting is really better for professional or experienced traders. You could just buy puts instead.
The only risk is the premium you pay.