***Official*** 2011 Stock Market Thread

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The-Noid

Diamond Member
Nov 16, 2005
3,117
0
76
What makes Tivo have such high prices for options?

Implied volatility. Implied volatility is extremely high on both ends, short side (puts) and long side (calls). Lots of people make speculative bets about lawsuits. Its is very common to see this in names that in the midst of legal disputes, but with annualized implied vol of ~78, participants are looking for a 78/SQRT(12) or 22.51% move in a month for the stock. That is why the cost is so high.
 
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Sep 29, 2004
18,665
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TheBDB,

If you want to see the extreme opposite of option pricing, go see JNJ.

Then look at the TIVO and JNJ stock charts. One is all over the place (relatively speaking) while one just kinda moves sideways:
http://www.google.com/finance?chdnp...cmpto=NYSE:JNJ&cmptdms=0&q=NASDAQ:TIVO&ntsp=0

Options are basically priced on two things. Volatility and stock price. If you want to learn more about what drives the part of option pricing based on volatility, read up on Black-Scholes. Don't worry. You don't need to know the math, just the premise:
http://en.wikipedia.org/wiki/Black%E2%80%93Scholes


TIVO option chain:
http://www.google.com/finance/option_chain?q=NASDAQ:TIVO

JNJ option chain:
http://www.google.com/finance/option_chain?q=NASDAQ:JNJ
 
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FelixDeCat

Lifer
Aug 4, 2000
29,312
2,101
126
For the options newbie - how do you do this?

Just Google selling covered calls for step by step examples. Diversity still applies. You can also do this with call spreads, which has its own risk and costs a lot more in commissions, but it takes the risk of holding the stock out of the way. So you can do a call spread on Tivo.

Ironically, Ive never actually done a call spread except on paper using theoretical costs and examples. You will need the highest level of option clearance to short options naked, and you also have to be aware of margin limitations on certain securities that will limit your ability to profit effectively (make it worth while).

Covered calls are easier IMO, erring on the side of falling rather than rising stocks (selling a strike below your cost). Also focus on slow and steady accumulation of compounding profits to sell more calls and generate more income.
 
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lothar

Diamond Member
Jan 5, 2000
6,674
7
76
NAV value will already take into account management fees. No need to subtract again.

NAV is reported net of fees including both management (published) and trading fees and impact costs which are not published.

lothar: Unfortunately Google Finance has problems calculating returns of things that pay dividends and capital gains like a mutual fund.

Net asset value = Assets @ day end - management fees for the day. The costs will generally be annualized as a percentage. Easiest way to see management fees is to buy separate accounts where you can set the expense ratio however.

Management fees do however not show what the cost is for best execution or trading costs and market impact. There are often soft dollars paid for research and other services, which generally comes out of a wider bid/ask spread, the impact on total return is the same but fee is not shown in management fees. However when you see the NAV you do not need to subtract the fee again. The actual performance of the fund would be an addition of the fee.

Hence the reason SPY doesn't track SPX 1:1 is the .10% expense ratio.

If you are looking for an example on Google Finance search for the retain of a high yield fund, which pay large dividends sometimes even returning capital. Google Finance has negative numbers over a 10 year period and often the return is significantly positive including reinvested dividends.
Thank you for your correction on management fees/NAV...Didn't know that those were already included.

I know that.
I meant to use M* like I always do when comparing funds, but I must have somehow forgotten or gotten lost in my entire post.

I appreciate your feedback and your time. What I do not appreciate is condescending, insulting, and useless “advice,” which really contains no advice at all.

I am aware of the management fees and I know where to find expense ratios. However, I suppose my understanding was that the fees were already factored into the return of the funds. If not, when does the investor actually see those fees affect them?
I don't think I did this to you, but if I did...where did I do this?

Might want to read Yoxxy's post before you reinvest your IRA.

He can post what his fund is and I will do the same comparison this time using M*, and we can also have Yoxxy verify that if he wants.
Knowing how overpriced T. Rowe Price funds are compared to Fidelity and Vanguard, I wouldn't be surprised if it's still beneficial for him to switch.

I'm not sure what Yoxxy posted besides what I quoted above since I've been out for ~3 days and this is my first post on the AT forums since then.
I see a second post of his that was edited out but I'm not sure what was there previously.

Anyone who's interested in the actual result can check M* for fund comparisons and performance. They give the "correct" performance adjusted for dividends and stock splits for stocks, mutual funds, and ETF's.

It's my one stop shop website for fund comparisons, not sure why I didn't continue to use them after Step 2 in my post. Guess I should follow my own recommendations

BTW...From what I heard I think if you have Vanguard funds, they will gladly change them to the equivalent ETF's free of charge with no commissions incurred for you.

The benefit is see with mutual funds like that, you're able to invest $xx/month. If you have $5k or something on hand already saved up, just buy the ETF. I realize not everybody has cash on hand saved up.
I'm not against all mutual funds...Just those who attempt to track a particular index and charge absurd fees (the 1.27% expense your fund charges for example).

If I was against all mutual funds, I wouldn't have 10% of our assets in the Fairholme fund and would be running a "Lazy Portfolio" of Vanguard ETF's all year round like a few people I know who already do and I wouldn't be picking my own stocks.
http://www.marketwatch.com/lazyportfolio
 

TheBDB

Diamond Member
Jan 26, 2002
3,176
0
0
Last noob question about selling covered calls.

If the option is exercised, how do you actually sell the stock? The Fidelity tutorial was explaining how you would get an assignment notice. Is the whole thing automated? Are there time limits if you do have actual actions?
 
Sep 29, 2004
18,665
67
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Picked up some PDLI this morning. It is a new Seth Klarman holding.

The financials looked good so I hit up the annual report and realized what the business model is. I really was reading to find a reason not to buy it. Couldn't find a good reason not to. So I bought it. I paid something like $5.38 this morning.
 
Sep 29, 2004
18,665
67
91
Last noob question about selling covered calls.

If the option is exercised, how do you actually sell the stock? The Fidelity tutorial was explaining how you would get an assignment notice. Is the whole thing automated? Are there time limits if you do have actual actions?

In a covered call, the term is the stock got "called away" from you. Yes, it is all automatic. You don't have to do anything. It just happens.
 

lothar

Diamond Member
Jan 5, 2000
6,674
7
76
Portfolio update:
I just cut my entire stake in ICO by 92% a few mins ago. Sold at $9.69/share.
 
Sep 29, 2004
18,665
67
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Can the SD run continue more? Forgot who suggested that one back low 7's but thanks.

I initinally did.

I am holding for a long time to come. Simple thesis is that oil prices will go up with a recovering economy. And as that happens, the trucking industry will move from oil to natural gas. It won't take much. A 5% reduction in energy costs will cause the move to occur since that industry is highly competitive. The spoiler could be the canadian oil sands, but that oil is not cheap to extract. It might provide a ceiling for oil prices though.

Trucking manufacturers said that such a move would take about a year to pull off.

That stock could go up quite a bit. Not saying that the past is a gauge, but it was over $40 when gas at the pump was $4+.

I can not tell you whether or not to sell. Mr Maket is a manic depressive guy. SD or any other stock can have crazy things to occur to them. Do what lets you sleep at night. Quite honestly, a dip to $5 would not bother me. Chances are that I would double my position and go about my day.
 
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Azurik

Platinum Member
Jan 23, 2002
2,206
12
81
RMBS has a very bullish chart right now. It cleared a bunch of hurdles today on the spike up without a sell-off (so far, knock on wood). If it can close out at this level, look for a further push higher. News? No news? Gimme something!

P.S. I'm still actively trading a few OTCs that made my radar based on volume surges. Actually doing very well this year on them. Some of them were quick 1 week - 3 weeks double/triple. Obviously I don't put much into them, I play each of them with about $10k or so. It's very obvious what people are doing with them... buying them early and getting promotions out. One just needs to time the buy/sell volume and drift properly. Because these are purely based on non-fundamentals, I won't post these to the board. Wall Street is controlled by people in the know that's for sure...
 
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Imp

Lifer
Feb 8, 2000
18,829
184
106
Finally solidified my position with F. Looks like a nice potential of at least 10%. Still losing some money right now, oh well.
 

lothar

Diamond Member
Jan 5, 2000
6,674
7
76
Picked up some PDLI this morning. It is a new Seth Klarman holding.

The financials looked good so I hit up the annual report and realized what the business model is. I really was reading to find a reason not to buy it. Couldn't find a good reason not to. So I bought it. I paid something like $5.38 this morning.

PDLI looks like it will be worth nothing in 4-5 years. What's the attraction?
 

Imp

Lifer
Feb 8, 2000
18,829
184
106
Major annoyance of the day: I just found out GPS exploded over the past week. I remember seeing it when it bottomed out weeks ago, and telling myself to wait a day or two, and get in there; I completely forgot until now. I'm a huge GPS fan/customer.
 
Sep 29, 2004
18,665
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PDLI looks like it will be worth nothing in 4-5 years. What's the attraction?

The attraction is the way they structure their contracts. They take a percentage of the revenues from people they contract with instead of a flat payment of some sort. if drugs are developed with their tech, they make money. if those drugs end up killing people, not their liability.

They have also changed their business model a bit. I'd have to revisit the annual report to state what exactly but when I read it, it sounded good.

And they are FCF positive.
 

lothar

Diamond Member
Jan 5, 2000
6,674
7
76
The attraction is the way they structure their contracts. They take a percentage of the revenues from people they contract with instead of a flat payment of some sort. if drugs are developed with their tech, they make money. if those drugs end up killing people, not their liability.

They have also changed their business model a bit. I'd have to revisit the annual report to state what exactly but when I read it, it sounded good.

And they are FCF positive.

What is their plan after the patents expire in 2014?
They only have 6 drugs in "early" phase development.

I've been told I'm looking at this company wrong by quite a few different people since yesterday...This company seems to be more like an energy trust(in which the assets continue to depreciate until eventually burning out) or bond(except you might not get your initial deposit back, but will be collecting all the interest).

Only for 2008/2009/2010. The remaining years going back to 2005 or even 2000 don't look that spectacular.
I suspect whatever changed their business would be found in their FY 2008/2009 report.

But then again, if "The King of all Bears" Seth Klarman is buying the stock, I shouldn't question it.
This could represent an excellent short term investment.
 

KB

Diamond Member
Nov 8, 1999
5,401
386
126
The attraction is the way they structure their contracts. They take a percentage of the revenues from people they contract with instead of a flat payment of some sort. if drugs are developed with their tech, they make money. if those drugs end up killing people, not their liability.

They have also changed their business model a bit. I'd have to revisit the annual report to state what exactly but when I read it, it sounded good.

And they are FCF positive.

This news doesn't look so good for PDLI:

http://aggregator.in/blog/2011/02/16/medimmune-and-pdl-biopharma-resolve-patent-disputes/

"PDL and MedImmune, LLC have entered into a definitive settlement agreement that resolves all legal disputes between them, including those relating to MedImmune's product Synagis® and PDL's patents known as the Queen et al. patents.

Under the settlement agreement, PDL paid MedImmune $65 million on February 15, 2011 and will pay $27.5 million by February 10, 2012 for a total of $92.5 million. MedImmune has not paid royalties to PDL on sales of Synagis that occurred after September 30, 2009. No further payments will be owed by MedImmune to PDL under its license to the Queen et al. patents as a result of past or future Synagis sales. As part of the settlement agreement, MedImmune has agreed not to challenge or assist other parties in challenging the Queen et al. patents."

Sounds like their patents aren't so strong. Know any more about this?
 
Sep 29, 2004
18,665
67
91
KB,
They have tons of lawsuits listed intheir annual report.

Lothar,
You could be correct and everyone else could be in the middle of a value trap.

All,
I might turn around and sell this one off (even at a loss). I honestly jsut need to read more.

Oh ya, Prem Watsa is now buying Abibiawater (however it is spelled). In terms of dollars and cents, I hink it is now his second largest holding!
 

coloumb

Diamond Member
Oct 9, 1999
4,096
0
81
Holy crow - what's going on? In the past 3 months, our company stock [semiconductor industry] increased to a price where most of my stock options are actually worth something again.
 
Sep 29, 2004
18,665
67
91
columb,

Tell us more!

PDLI:
Also, I'm reading more about PDLI. They have exited manufaccturing and no longer have commercial assets. This has elminated capex it seems. Since they simply collect royalties now, they turn over half of revenues into cash flow from operations. So, most of the revenues generated, it seems, correlate directly to FCF. On top of this, they have said that they intend to do share repurchases and possibly doing dividends to the tune of $1 each year going forward What I don't know (yet) is why the share count went from 120 million to 140 million in the recent quarter. Still reading.

Even though it seems that patents expire in 2013 and 2014, any agreements that have been made will continue on. The contracts do not seem to terminate at patent expiration.

Oh, they intend to sell the patents and royalties assets when the economy gets better. So, this is turning into a matter of determining what those are worth (future cash flows discounted to todays dollars plus profit margin for the acquirer). So, the formula should be simple. FCF is about $200M each year (should be going up for a few years). If you take those FCFs for 3 years that's $600 million but the royalties assets go beyond 2014 (if I am understanding correctly). So this is a $700M market cap that is probably going to return over $600 million to shareholders. It seems like this is some sort of arbitrage. This company is planning to shut down operations and give the net proceeds to the shareholders.

EDIT: The revenues from royalties: In 2009, 2008 and 2007, we received approximately $305.0 million, $278.7 million and $224.7 million,
respectively, of royalty revenues under the license agreements. Those are some nice numbers going forward, especially if this company intends to sell off this off and shut down operations.

Right now, I will continue to hold and dollar cost average if the opportunity presents itself.

Medimune patents .... As of the 2008 annual report, that seems to be the only litigation onoging. Still reading of course.

Medimune patent issues from 2008 annual report
European Patent Oppositions
Two Queen et al. patents were issued to us by the European Patent Office, the ‘216 Patent and the ‘040 Patent. We are currently in two separate opposition proceedings with respect to these two patents. We intend to continue to vigorously defend our two European Queen et al. patents in these two proceedings, a description of which is set forth below.

Opposition to ‘216 Patent
In November 2003, in an appeal proceeding of a prior action of the Opposition Division of the European Patent Office, the Technical Board of Appeal of the European Patent Office ordered that certain claims in our ‘216 Patent be remitted to the Opposition Division for further prosecution and consideration of issues of patentability (entitlement to priority, novelty, enablement and inventive step). These claims cover the production of humanized antibody light chains that contain amino acid substitutions made under our antibody humanization technology. In April 2007, at an oral proceeding, the Opposition Division upheld claims that are virtually identical to the claims remitted by the Technical Board of Appeal to the Opposition Division. The opponents in this opposition have the right to appeal this decision of the Opposition Divisions. If any of the opponents appeal the decision to the Technical Board of Appeal, the ‘216 Patent would continue to be enforceable during the appeal process. The deadline for filing notice of appeal has expired. Five opponents filed such notices and, of those, three have filed Grounds of Appeal.

Opposition to ‘040 Patent
At an oral hearing in February 2005, the Opposition Division decided to revoke the claims in our ‘040 Patent. The Opposition Division based its decision on formal issues and did not consider substantive issues of patentability. We appealed the decision to the Technical Board of Appeal. The appeal suspended the legal effect of the decision of the Opposition Division during the appeal process. The Technical Board of Appeal has not scheduled a date for the appeal hearing with respect to the ‘040 Patent.
 
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lothar

Diamond Member
Jan 5, 2000
6,674
7
76
KB,
They have tons of lawsuits listed intheir annual report.

Lothar,
You could be correct and everyone else could be in the middle of a value trap.


All,
I might turn around and sell this one off (even at a loss). I honestly jsut need to read more.


Oh ya, Prem Watsa is now buying Abibiawater (however it is spelled). In terms of dollars and cents, I hink it is now his second largest holding!
Never said it was a value trap.
It doesn't fit any "value" metrics anyway so I don't think the definition of value trap holds water. "value traps" fit the value part through low ratios (P/B, P/E, etc...) that look appealing on paper, until you dig further and discover the traps included such as rapidly declining cashflows, sales, revenues, etc...

I simply think we all need to look at the company a little differently than using our "traditional" valuation methods.

Don't think I advised buying or selling either way. I am simply trying to get more information in case I missed something.
I did buy the stock this afternoon BTW.

Everybody has been buying ABH...Have we missed the boat?
 
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