Tag: Stocks

Credit Spread Adjustments: Delta Hedging with Stock

Credit Spread Adjustments: Delta Hedging with Stock

Trading Strategies
One of the most effective ways to adjust a broken out-of-the-money vertical spread is with stock. So many of us in the retail world—having been introduced to the flexibility and/ or leverage of options—seem hotly opposed to taking a position in an underlying stock, ETF or futures. Many of us would rather torment a simple vertical spread with layer upon layer of complicated adjustments, so that what started out as a hands-off strategy becomes a position that must be constantly tweaked—the original thesis for the trade reduced to a footnote. The Decision to Adjust Often the biggest risk to a credit spread is price: a trader establishes a position and price woefully moves in the complete opposite direction than anticipated. When trading out-of-the-money credit spreads, the general ass
Monsanto is ripe for a pull back to 100

Monsanto is ripe for a pull back to 100

Technical Analysis
Monsanto is in the news after an initial Bloomberg report that Bayer AG, the German pharmaceutical giant was considering a takeover of the bio tech company which is well known for its GMO (genetically modified) seeds and agricultural products. The takeover bid was for $62 billion and was unsolicited. Under the terms, Bayer approached Monsanto for a deal which includes an offer of $122 a share, which is at a 3% premium. While the offer was made on Monday, Monsanto rejected the bid. The company said that the offer from Bayer AG was inadequate but said that it was open to continue the conversation. In a statement, Monsanto CEO Hugh Grant said "We believe in the substantial benefits an integrated strategy could provide to growers and broader society, and we have long respected Bayer’s busin
Caterpillar Inc. – This short position could work

Caterpillar Inc. – This short position could work

Technical Analysis
On Friday May 6th at the 21st annual Sohn Conference in New York which saw hedge funds coming together for a charity for pediatric cancer, David Einhorn, founder of Greenlight Capital noted that he was short on Caterpillar Inc. (NYSE: CAT). He said that Caterpillar Inc's business was at the bottom. Asking the question whether Caterpillar Inc. was at or near the trough, Einhorn said that he thinks it is much close mid-cycle and that it could bottom in 2018. Most importantly, he said that he expect Caterpillar Inc. to trade at half of its current price. On May 6th, market close, Caterpillar Inc. close at $73.36. More details here. Justifying his call, Einhorn said that Caterpillar's business, which is primarily in resources, construction, energy and transport; sectors that are currently w...
What influences a company’s share price

What influences a company’s share price

Financial Markets Explained
Ever noticed when the stock market crashes or corrects itself, it does so quickly and sharply? This is fear at work. When the market is positive and moves up, this is greed at work. The market always moves down quicker than it moves up, therefore we can deduce that fear is a stronger emotion than greed. This can also be interpreted in financial terms such as bullish and bearish, where the term bullish or bullish market means the market is positive and rising while bearish or bearish market refers to the stock market going southwards. At a basic level, a stock is the initial capital that a company has. When a company goes public (meaning that the ownership of the company shifts from a closed and private group of individuals to whoever wishes to buy a share in the company), it splits this...