being short the puts is fine if your bullish on the stock, your upside is limited to what you sold it for. As long as you feel HGT wont go much above 8 with a positive litigation and cold winter you are fine
If litigation is resolved favorably for HGT, they are given back the 4mm they originally paid out, or 10 cents a share. You also receive another 14 cents in dividends, so if the stock goes to 8, you will make $1.14 on the stock and 75-80 on the puts...Its if the stock goes significant higher that you lose out on the put...
With the puts having almost 100% downside at this level, i would probably swap out of the puts and just buy the stock if your bullish....$7 has been great support and that was before nat gas went from $3.50 to $4.15
buy the stock and hedge it with the Feb 7.50 puts
a)there will be a one time catch up dividend of 10 cents which will be paid before the Feb expiration, so assuming dividends of 14 cents for Dec/Jan (i am factoring in higher nat gas) and a one time catchup of 10 cents, that is 24 cents of dividends to be paid out by February expiration. At current price of $7.11, there is 40 cents of parity plus 24 cents of dividends, which means 65 cents of parity in the puts.. They currently trade at 75 cents, which means you are only paying 10 cents for protection, and if per chance nat gas trades off OR litigation results are negative, the puts should provide 90% protection.. If nat gas keeps moving, and we get a positive litigation outcome, and stock goes to $8.50, you will make $1.40 in the stock, and lose 75 cents in the put, so about 50% tracking
In sum, being long HGT and long the 7.50 puts gives you 50% of the upside and only 10% of the downside, not a bad risk/reward tradeoff
Yes, i think many people are of the mindset that a negative litigation outcome gets this stock to $6
Remember, no dividends for a year, there are certain funds who CANT hold non-paying stocks, so they would have to liquidate as well, so what you might think is 60 cents downside, would be double that
On the PLUS side, Nat Gas has been ripping, so if there is a positive outcome, i expect the stock to trade towards $8.50 in a short time
Surprised we havent heard litigation results yet - the panel met 3 weeks ago - i would be surprised if we dont have results in the next week
Working Center is semi-right about put/call ratio
HGT gets hard to borrow, especially over dividend date AND there are a decent amount of short bets coming in ahead of the litigation hearing and possibly based on the negative seeking alpha piece
If you dont want your short to get pulled OR you dont want to pay the exorbitant rates over ex-dividend (it spikes to about 20% for 5 days a month), you would buy the puts most likely the February, which give you the volatility for the litigation outcome AND whatever move you get from a warm or cold winter
I am sure Mortimer will be happy to sell some Feb 7.5 puts to you :)
I cant think of any other person on these boards who gets their name in subject headings :)
amazing to me that the most significant change to HGT is probably less than 2 weeks away and the only one who wants to discuss the outcome is a guy who is short HGT puts...
what are your thoughts and expectations for HGT reaction from the recent tribunal hearing where the results are due out any day
Seems that if its a total negative and HGT is responsible for past costs, results may be extrapolated to similar cases, and HGT wont be paying dividends for over a year and stock could go down to $6
If results are in the middle and tribunal splits the responsibility - i would assume it depends on how the responsibility is split - any color here is appreciated
If HGT is found to be not liable for past expenses assigned and present costs, I think stock could be a real ripper, as we would make up for past dividends that were held back and I also think the market has somewhat factored in an adverse ruling.....I see the stock going to $10 IF we get $4 nat gas
i wish you were correct as i am long...Seems like the worst case scenario - they wont pay dividends for a year - which is 75 cents at present rates...Double factor in some funds/individuals that wont hold non-divvy stocks - and we can easily get down to $6
If your conjecture is correct and worst case is factored in - this stock would fly with even a modest positive outcome, and as i have mentioned before, a fully positive outcome, where prior penalties are reversed, can get this stock to $10
I expect the arbitration decision to be announced before month end - which would have the effect of moving the stock either up $2-$3 or down $1+....So was looking for color from other investors on what they have heard about the panel
when an arbitration hearing just concluded that will dictate where this stock goes for the next year
We can have $5 nat gas but if we have a negative ruling, this stock is back to 6
does anyone on here have color on the progress of the litigation..Arbitration hearings tend to be shorter in duration than regular jury hearings,so i would expect resolution well before month end....
Also - i would expect if the hearings go 100% against HGT - we could go down to $6, the more likely scenario is a split decision, where HGT is forced to pay part of the costs which could result in no dividend for a few months (3-4, as opposed to over a year)
If HGT is found to owe none of the costs and actually gets a reimbursement of past costs laid out - the stock will rip higher - and based on where it was trading RELATIVE TO OTHER MLP's before the litigation, we could easily trade over $10 with a little help from Nat Gas !!
Appreciate any objective comments and color
Looks like Muddy Carson and his clients are trapped in a short that poses a significant risk of buy-in and best case - is running at 20% a month to keep the short on. From the volume patters it looks like their cost is around 12-14, so i would expect a decent amount of short covering if we pull back to 12 and a potential squeeze if we break over 17...
From the Muddy Waters Twitter page - looks like they are pretty desperate to talk this thing down - as their language has gotten more and more inflammatory as the stock has been moving against them