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Skullcandy, Inc. (SKUL) Message Board

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  • coreylynnh@sbcglobal.net coreylynnh Dec 13, 2012 12:41 PM Flag

    Short Interest

    I wrote a reply but I am not sure why I don't see it posted. So I will make one again.

    The days to cover don't mean a hill of beans unless there is a short squeeze. If there is a short squeeze then days to cover could be an indicator as to how high the stock may go, but that is difficult to calculate because there are a lot of other unknown variables that will dictate the squeezed price. The problem I see is that too many investors on this message board and in general seem to be invested in SKUL for the short squeeze and a short term gain. This is why the short sellers win the battles. The new investors come in and when the price is driven down, perhaps by a shot of short selling, they bolt because they don't understand what happened, didn't get their big short term gain, or both. This leads to a "long squeeze", the short sellers can cover with little problem, and the cycle happens again at some point. If you are invested in SKUL for a short squeeze then you are wasting your time and probably money because you will likely do a panic sell when the price plummets. If the short squeeze happens then gravy, but you should be invested in this stock only because you believe they have a brand that will stick and believe they are a growth story that will continue. If you are investing for any other reason then find somewhere else to invest because you will likely lose money.

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    • Corey

      Totally agree... as one of the few guys left on this board that didn't "jump ship" and I still hold a large stake in the company (not 100 not 1000 not 10,000 shares). Problem I see with this stock is that everyone was all "short squeeze a coming" and when the stock started to drop, they bailed. That is their right of course... But, what they did was to allow the shorts to pick up shares on the way down... kinda stupid if you ask me as the mass's went into panic mood. The comment I hear over and over on the board is "Institutions are selling" and bye bye to the stock. Buy and hold as you said if you believe in the stock and brand... I do as the stock is way undervalued in my opinion. Plus, the day traders are all into this stock... That equates to shares available to short...

      Spoke my peace...

      Sentiment: Strong Buy

      • 1 Reply to michaelsistowicz
      • coreylynnh@sbcglobal.net coreylynnh Dec 13, 2012 2:57 PM Flag

        Some further comments. Michael this is not a knock on you, but I think this is a stock where buying the stock outright is a bad move. This stock is perfect for options traders. I could sell a January 7 Put right now for about a 3% premium. In fact, the shares I acquired occurred at the November expiration by selling an 11 put pre-earnings release for a 5% premium. I would much rather have had the stock finish above 11, however as it currently stands I can sell a January 11 call for 1% premium. The stock dropped 50% and I am still in a position to profit through options over time. That is why there is so much option volume on this stock because the premiums are incredible.

        An astute observer would also have seen the conversion strategy for this stock. One of the legs includes a short sell, another leg a sold put, and another leg a bought call at the same strike price as the put. The short sell had to be at a price above the strike price. Since the put sell had a greater premium than the bought call at this lower strike price you could lock in a profit and cover your short position no matter where the stock goes. It was sitting there in the December expiration for a long time. The current future option months also have a small profit to be gained using this strategy right now. That is, IF you can borrow the shares for free or at a very reduced interest rate. With my broker I would have needed to pay a 100% annual interest rate to borrow shares to short the stock and therefore it was not profitable for me to do so. But I bet there were people who could borrow those shares on the cheap, likely those who had a lot of dollars to short with, and they locked in huge profits. I further speculate, though I don't have the data to prove it, that a lot of December put options were exercised early upon the stock drop and when that happened those who were short using the conversion strategy and acquired those puts would automatically have covered their short position from the transaction. The last leg to be closed was the bought call which they may have further profited from by selling that call leg of the conversion to close that position. Or, possibly they are still holding onto it waiting for further stock appreciation so that call premium rises, albeit the time decay ate most of that profit away, or they are just letting the calls expire worthless. The data you would need is the change in the put/call open interest as time went on to see if they declined over time and especially during the time of the shorts covering those huge share blocks. That 15 strike price seemed to be where most of the profit was to be had for a long time and it is interesting that the call open interest is currently far greater than the put open interest at that price. That strike price also has the most current open interest, although the 17.50 and 20.00 strikes also have a large volume of open interest. That's not proof I am correct, but a potential indicator. It would also be interesting to track the open interest as the December expiration gets closer and closer, but I doubt much will happen at the 15, 17.5, and 20 strike prices for the calls unless the stock moves up hard.

    • Your post probably disappeared because the twits at Yahoo don't seem to know how to organise a message board/party in a brewery. If any administrators are reading then sort it out please, or people will stop using the boards altogether. Too much hassle spending time posting for it to just disappear. I'm pretty sure I'm not the only one experiencing lots of issues here.

      • 1 Reply to A Yahoo! User
      • Wise words, thanks for your comments Corey. I agree that a short squeeze shouldn't be the main reason to invest your hard earned here. It should be an 'O' in a SWOT analysis, but I see other more fundamental reasons for buying in. Perhaps you're right about holding this stock being a bad idea (I'm not experienced enough for options trading) but I do think the company can profit long term in this market though.

        Main reasons I invested are - Continual revenue growth. Growth of overal market for headphone accessories.Strong brand awareness and established place in that market. Investment in new regions (Europe) which should pay dividends in time. Attractive valuation multiples. Company carries virtually no debt.

        Sentiment is against this stock right now, shorts in control. Long term I see value winning out. If growth starts to slow significantly then I'll get out.

    • Will try a third time. Maybe I offended Yahoo last time round, as my post seems to have disappeared again.

      Thanks for your comments Corey, nice to see some logic and reasoning here so stick around :) I'd agree that a short squeeze should be identified as an opportunity in any SWOT analysis before investing, but it definitely should be the main reason for investing.

      Main reasons I invested? Continued, consistently increasing revenue. Massive growth in overall market for headphone accessories. Attractive valuation multiples. Strong brand awareness. Growth and investment in new regions (Europe). Virtually no debt.

    • Wise words, thanks for your input Corey. Short squeeze should be an 'O' on any SWOT analysis, but not the main reason for investing here. Sustained revenue growth, low valuation multiples, strong brand awareness, HUGE growth in overall market for headphone accessories and a company that carries virtually zero debt. These were some of my reasons for investing here.

      Sentiment: Buy

    • Posted a response earlier but seeing as Yahoo can't organise a pish up in a brewery it's disappeared. Anyway.....

      Wise words Corey, thanks for your thoughts. I'd agree that while a short squeeze should be in the 'O' of any SWOT anaysis, it shouldn't be the main reason you invest your hard earned here. There are other fundamental reasons to believe that the stock price can rebound strongly from here.

      Massive growth in the overal market for headphone accessories, consistent, continual increase in revenues, strong brand awareness, attractive valuation multiples, investment/growth in new regions (Europe), from a company with virtually no debt. These are some of the main reasons why I'm invested here.

      Sentiment: Buy

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