Tag Archives: GOOG

A Safer Options Bet For Arbing $AAPL and $GOOG : Think “Dividend Strategy”

February 13, 2015 MarketsMuse Staff Reporter Leave a comment

MarketsMuse update profiling a very intriguing options strategy for professional traders is courtesy of a.m. edition of “Sight Beyond Sight” , the global macro strategy-centric publication from Rareview Macro LLC. The MM editors include former option market-makers and we’re reasonably confident that the following idea has not yet been considered by those who pride themselves on innovative, yet low risk option strategies. Caveat: for professionals only.

New Idiosyncratic Situation in Apple & Google…Avoiding the Mainstream Noise

There is no overnight recap today. Instead, we are going to present an equity idea on Apple Inc. (symbol: AAPL) and Google Inc. (symbol: GOOG).

If a discretionary money manager looks at their portfolio construction through the lens of “return streams” one such bucket would be called “idiosyncratic”. It is debatable what type of investment qualifies as “idiosyncratic” but we would argue “option conversion arbitrage” falls into this category nicely.

Option conversion arbitrage does not typically find its way into books about options trading. That is not surprising, given that the term alone would prompt most eyes to glaze over. With a little extra effort, however, this stock and options combination strategy should not be too difficult to fully understand.

Furthermore, demystifying conversion arbitrage does not require an advanced degree in finance or being a veteran market maker. All it will require is a basic understanding of put and call options (both buying and selling), familiarity with stock buying/shorting and knowledge of the stock dividend process. Conversions incorporate these elements, and a few others, in their cost and profitability structures and in the dimension of risk assessment, so you should brush up on them before getting started. Continue reading →

ETF News

Social Media ETF Index Weights Facebook (FB) at 8.8%

May 25, 2012 MarketsMuse Staff Reporter Leave a comment

The Solactive Social Media Index, the index tracked by the Global X Social Media Index ETF (Nasdaq: SOCL), has allocated 8.8% of its weight to Facebook (Nasdaq: FB), according to Global X. The Global X Social Media Index ETF, the lone ETF devoted exclusively to the burgeoning social media ETF, has been widely viewed as the first ETF destination for Facebook, the largest social media company.

It was expected that the index would add Facebook following the end of the stock’s fifth trading, which was Thursday May 24, and that the change would be reflected in the ETF on the next trading day.

Global X could not confirm the weight of Facebook within SOCL, but assuming the 8.8% allocation from the index carries over to the ETF, Facebook would have been SOCL’s fourth-largest constituent on Thursday behind LinkedIn (NYSE: LNKD), China’s Tencent Holdings and Sina (Nadaq: SINA).

SOCL has lost about 5% since Facebook’s IPO on May 18, but the ETF has seen it’s assets under management surge to over $25.1 million from $16 million and its average daily volume jump to over 50,000 shares from 36,000 shares.

At the close of markets on May 24, SOCL was home to 27 stocks with other prominent names including Google (Nasdaq: GOOG), Groupon (Nasdaq: GRPN) and Yelp (NYSE: YELP).

Strike Price

What’s Next?..Options Trading On Facebook (FB)

May 18, 2012 MarketsMuse Staff Reporter Leave a comment

Options on Facebook (NASDAQ: FB) will be available as early as May 29th. With volatile price action in FB after its IPO, traders will look to options strategies to profit

In the next several months FB is going to face pressure to grow into its current 100 Billion dollar valuation. As a growth stock trading over 100 times earnings, any sign of slower growth in Facebook will cause the stock to plummet quickly.Traders who do not think Facebook can hold its current valuation have a number of options strategies to profit from any fast downside price action.

Depending on implied volatilities of FB options, traders can be either short or long volatility. It is unlikely that FB stock will increase or decrease in value by more than 30% in one year. If options are trading will implied volatilities greater than 30%, traders should be net sellers of options. Selling vertical call spreads, which involves selling call options at strike prices above the current price and buying a call option at strike prices even farther out from the current price. This strategy will be profitable if FB maintains its price or decreases.

Notes WallachBeth Capital’s Randy Sharringhausen, an institutional options market expert, “Even if the company’s fundamentals don’t come close to justifying its IPO price, this is a company that has 450 million customers that visit every day and a corporate treasury flush with enough currency to finance any number of major acquisition to better monetize its customers. This should prove to be an interesting name to trade by the hedge fund and risk arb community, as well as the long/short managers.”

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