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EV Energy Partners LP Message Board

  • porciuscato porciuscato Feb 11, 2013 1:59 PM Flag

    Beating down the stock to buy the options

    Suppose I had 10,000 EVEP units and I wanted to leverage the possibility of a deal, but also limit my downside risk....

    I might just come in on a day like today and drop 1-2K blocks at opportune times to hammer down the price.

    As soon as the price got down say 3% or so, bingo. I would buy 2500 March 65s and and 300 March 60 options.

    The net result? I've tripled up my exposure to the upside and have limited my downside risk about $1 a share.

    Sound silly to you? Look at the price action today. And look at the big options trades that just occurred 10-15 minutes ago.

    Sentiment: Strong Buy

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    • I printed this out and filed in a folder I am handing my two sons when they are old enough to trade. This is such a good explanation of what can move stocks at a granular level that it reminds me of some of the vignettes in Reminiscences of a Stock Operator.

      Sentiment: Buy

      • 1 Reply to eckhart2
      • artist_formerly_known_as_pooch artist_formerly_known_as_pooch Feb 11, 2013 3:34 PM Flag

        While I respect the poster who wrote that, every EVEP chart you can look at goes from top left to bottom right. No one needs to drop a few thousand shares to beat down the stock price. You just wait a while. It goes down on it's own.

        His theory of a replacement strategy, though, definitely fits. There still is the belief, EVEP will jump on a deal announcement. Buying units here is still risky as a "no deal" has about $10 worth of downside. The strategy may be selling but hedging the "Upside risk"

        the selling isn't "weak hands" getting scared. The units being sold are people seeing EVEP go down while everything else in their portfolio going up. My disposition was a little different in Nov and Dec when ALL MLP's went down. Now, pretty much all MLP's are going up. EVEP is bleeding.

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