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GameStop Corp. Message Board

  • flyerd1 flyerd1 Jan 4, 2008 3:01 PM Flag

    O/T: Other recent trades. Anybody else have a few?

    Doing some speculative nibbling lately... Here's a few (for those interested). If you're not interested please just skip this thread and have a nice day:

    Buying RAD Jan(10) $2.50C's for .90 This is a fun one because the bid/ask has been .90X$1.0 all day and I've been getting partial fills on the bid side (I love getting filled on the same side I'm trading :-) My order has a partial fill of 6 contracts so far with a little over an hr to go.

    Bought 7 vertical call spreads in RAD(again). They're the Jan(10) $2.5X$5 for $.70 That was a few days ago and I'm trying to buy another 8 of those for .40 to avg the position down.

    I have an order in for some etfc $2.5X$5 strangles at $2. At $1-1.50 I'd be able to sell the put for $2 and above $6 the call should be worth $2 (time dependant of course).

    I'm also doing some speculating in some banking stocks (like c and bac) and getting interested in possibly nibbling at a few homemakers. lvlt's another spec I'm looking at. I may do some strangles in the solar sector if I can find some reasonably priced ones.

    I always buy in slowly though and plan on making a least 2-3 transactions to get a full position. If I only get 1-2 fills that just means I was "too right" on the call because the stock's already moving in the direction I expect it to. Speculating is like a crap shoot though (hit or miss).

    Less speculative, I'll be looking at UNH, NUE, and some refiners after a few more $'s down.

    GITA!!!

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    • I see your point and agree with your logic. however your missing the boat. Let's talk in the form of market cap. Let's look at LH. It's stock recently got hammered. The company immediately announnced a buyback to support its price because it knows if its price gets any lower some companies will buy it quicker that a snake eats a mouse. Compaies look for bargins like any other normal person. If the market presents that vaule in the form of a low stock price a company that wants to remain independent will try hard to take that bargin away. If you have 5 people/groups with with 5B to spend that would like to buy your company. you have 5 wolves to keep at bay. You can buy back some stock, increase the div find a white knoight etc. This is more managable than say if your company suddenly falls from 5b market cap to say 1 biullion market cap. Then you may have 100 wolves at the door.

    • "sinking share price causes fear, an increasing share price causes greed. You will take less options if you are in the greed phase and more options or different types of compensation if you fear it will decrease in vaule. Therefore it is in the companies best interest to keep the share price as high as possible to keep all labar cost contained."

      --> Completely agree with the first 2 sentences. The last sentence is where I think the actual price is meaningless (unless you're talking penny stocks where emotion plays a bigger part). I.e. as long as a stock keeps going up people will be happy regardless of the price of it. A $10 stock that goes up 15%/yr for 10 yrs would have kept everyone just as happy as a $100 stock that did the same. The only thing that matters is the % return, not the actual price.

      IRT people buying a company: Anyone (or group) that has enough $ to buy a controlling interest couldn't care less as to the share price. They just look at the fundamentals and the "overall cost" to buy the controlling interest. I.e. if it would cost 5B for a controlling interest they would pay 5B and would own "however many shares that bought" wheather that was 5 shares at $1B/sh or 5B shares at $1/sh.

      Another good discussion.

      GITA!!!

    • My example used a 10B mkt cap. You mentioned having 10B instead of only 5B but 10B is an excessive figure considering a person could typically gain the controlling interest we are talking about with "less than" 50% of the shares (it could be as little as 10-15% depending on current size of the controlling interest and the float).


      regardless of the % or the price. The lower the share price the more groups that can buy your company. Therefore it is in the managements best interest to keep its share price as high as possible. not to mention it helps keep their job with the board.


      What am I missing here?

      A sinking share price causes fear, an increasing share price causes greed. You will take less options if you are in the greed phase and more options or different types of compensation if you fear it will decrease in vaule. Therefore it is in the companies best interest to keep the share price as high as possible to keep all labar cost contained.

    • My example used a 10B mkt cap. You mentioned having 10B instead of only 5B but 10B is an excessive figure considering a person could typically gain the controlling interest we are talking about with "less than" 50% of the shares (it could be as little as 10-15% depending on current size of the controlling interest and the float).

      2) I agree. That's what I was saying as well irt dilution.

      3) Again, that doesn't make sense to me irt talking about why it's in the interest of the co to keep the share price high. Assuming a stock that falls 20% after the options are granted: what does it matter if the stock was at $200 or $20? The stock still fell 20% so there's no difference in regard to the stock price to the option granting. What am I missing here?

      GITA!!!

    • That's true if the person wanting to by has say 10b instead of only 5 b. The lower the stock price the mare people/companies are able to buy out the company including hedge funds, private equatity etc. So all things being equal the higher the price the more security a comapny has IRT to own destiny.

      2) you get to the law of dimishing returns. the higher the share price when you do a seconadry the less stock you have to issue, the more you can keep without going back to the shareholders to up the # of shares outstanding. Basically the higher the share price the more options you have has management and greater freedom to do things without going hat in hand.

      3) Yes they can issue my options but if the share price falls, those options will not be taken at the same vaule and CEO's board memebers will request cash and other forms of compensation to offset the risk of a sinking share price. This also goes to the freedom of movement management has.

      As far as the $100 bill I understand your point and agree. However a government has way more options to keep its currency vaule than does a company. It also is the only currency you can use within its borders. Thus it has to have some vaule because it will buy physical things up to the point that it is not accepted.

    • IRT the $100 bill "I think" gridiron was talking about what has happened at various times & places around the world. I'm talking about the need to take "wheel barrels full" of cash just to buy some bread, milk and eggs when the "value" of the currency becomes practically worthless. The point being that "any" paper (The greenback, stocks, Yen, etc) is only worth whatever others are willing to accept it to be valued at. gridiron can correct me if I didn't accurately represent her intent. :-)
      -----------------------------------------

      "The reason companies defend their share price once it is issued is because 1) a low share price will allow other people to buy a majority of the stock on the cheap and therefore control the company. 2) a high share price gives the company a quick way to gain cash in secondary offers. 3) it allows companies to diferr labor costs by paying employees in stock options. thereby letting the shareholders pay the bill for the outlandish salaries of their top exceutives."

      I might be misunderstanding you? I'm not sure but this is my take on that paragraph:
      1) I don't know why a lower price would allow others to buy up a majority of the stock any more than a higher price. A 10B mkt cap company with a stock at $20, 40, 80, or 200 is just as susceptible to a 2, 3, 4, 5B dollar investment (whatever would be required to take a controlling stake). The actual stock price matters not. 2) Similar to #1 in that regardless of stock price, if a company wants to raise cash they just offer the # of shares that correlates to how much they want to raise. However, it would be nice to have to release less shares irt dilution. 3) Nothing to do with stock price. They just issue a different number of stock options depending on the price of the stock.

      GITA!!!

    • $100 bill has a different vaule because you can buy other stuff with that $100.00 bill. Therefore it's vaule is based on what you can buy with that piece of paper. It is also backed up by the full power of a government which has to a large extent unlimited powers to keep the vaule of that piece of paper through taxation, tarrifs, laws, regulations etc.

      A stock you can not buy anything else with that paper. Sure you can use it for secuirty for a loan, or margin but you can't go to your local store and buy a gallon of milk with a stock. Therefore the basis of a stock is that you have some ownership rights with the company. You can vote for board memebers, vote on other workings of the company. If you have enough of the stock you can control the company. With div paying companies you also recieve part of the company's profit. Therefore it has some vaule but that vaule is totally determined by what others think minus the div. If they "feel" the company is going to grow then they believe that someone in the future will think that piece of paper is worth more. If they feel the comapny is going to come into hard times then they believe that someone will pay less in the future.

      This is the basis for the daily movements of the market. Belief or in other words fear and greed. Over the long term the companies will pay out div or will accumalate some assests in which that stock has some rights. However, bond holders have the first rights to those assets and therefore when a company goes belly up the stock goes quickly to zero. Because usally there is nothing left after the bond holders take their share.

      You are right to say that the market will only remain as long as people see the chance for vaule. As far as owning a piece of the company unless you have alot of the stock and therefore have alot of voting rights that ownership is basically worthless as far as vaule goes.

      If people in mass decide that the market is worhtless then it will be worthless. This is why the market can go to such extremes regardless of the underlying economic, company fundementals.

      If you look at stocks this way it saves you from falling in love with the company. The company gets no vaule form its stock price onece it has issued it. It gets no more additional funds from the stock once it sells it into the market. The reason companies defend their share price once it is issued is because 1) a low share price will allow other people to buy a majority of the stock on the cheap and therefore control the company. 2) a high share price gives the company a quick way to gain cash in secondary offers. 3) it allows companies to diferr labor costs by paying employees in stock options. thereby letting the shareholders pay the bill for the outlandish salaries of their top exceutives.

      Therefore the stock price has vaule to the company at some point, it has vaule at some point. But that vaule is totally determined by what others think it is and not on any type of fundemenatal vaule. underlying fundementals being constant, the lower a stock goes the more people see the vaule in the stock, the higher it goes the less people see the vaule.

      If underlying fundementals are not constant then the stock price becomes whatever people believe it will be.

    • "From our discussions I understand you view that stocks have vaule. I don't think that way. Stocks to me are pieces of paper that are in the end vauleless. Their price at the end of the day is what someone else is willing to pay."

      Sorry if I'm butting in, but I found this an interesting viewpoint. Certainly nothing wrong with viewing it this way b/c isn't that basically how the worth of anything is valued? A $100 dollar bill's only truth worth (outside of what someone else is willing to value it at) is maybe as firestarter. It's just a piece of paper as well.

      I personally try to view stocks as owning a piece of a physical company b/c it's the only way I can invest. I have FAR too little money for GME to be interested in me providing capital for them without issuing those pieces of paper. So, how else do you value (besides looking at the company) what someone might be willing to pay for those pieces of paper? I'm just not a good speculator so I need some tangible reason (the company) to invest.

      I guess a literal stock certificate is just a piece of paper, but what in the world has value that is not defined by what others would pay for it? Or perhaps I'm misinterpreting your definition of value. To me, stocks will only be valueless if everyone decides it's a terrible system and they no longer wish to participate in trading pieces of paper.

    • yes. Waiting this bounce at 12,500 is a false bounce IMO. But it's getting close. 12,000 level on the dow will get me excited about the market again for long term if the FED and gov finally "gets it". Still looking for day trades of oppurtunity. I should have struck around this morning and played YUM like I wanted too. Oh well tommorrow's another day.

    • Good points on both sides. That's what makes a good discussion (and a mkt). Only time will tell. I actually like this mkt decline. It's giving me the opportunity to raise more cash. I'm very close to selling more puts in GME, ATVI, TTWO, and ERTS. Those will be my absolute least worrisome put sales.

      GITA!!!

      P.S. I sold BAC Jan(10) $40 puts today for $8.60 (I planned on changing it to $9 but didn't in time, oh well :)). If it declines more I'll either sell another batch for $12.60 or sell $35's for $9'ish.

      P.P.S. Nice move going mainly cash a few wks ago. You must be getting pretty close to buying some stocks (the kind you'd be ok with holding for a yr).

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