Random Notes
Analyst estimates, especially FWD EPS estimates, should be looked scrutinized for (likely or unlikely) accuracy.
If a company warns two-consecutive quarters in a row and is selling stock at the same time the overall economics of the business and management’s honesty should be questioned.
The discrepancies existing between the lowest and highest FWD sales and earnings figures should be examined. If a large spread exists then you’ll have to figure out which range is more likely based on your own DD. Taking into consideration how many times the Street has been “surprised” (either upside beat or downside miss) by the company in recent quarters, you might be able to draw parallels as to how much the company will beat/miss in the near future, and thus be able to arrive at a less narrow range of estimates that those put out as a Street consensus by analysts.
Near expiration options which lie close to an earnings call are often too pricey due to the fact that the options market factors into them an anticipated acceleration in volatility in the immediate future. And you might bet the wrong side, or you might bet on the right side but the movement might take longer than the amount of time remaining till expiration (thanks to the big boy hedge fund dudes and their crook MM pals and floor boys on the exchanges). Thus, longer term options (LEAPS) are more advisable, especially when you’re laying a large part of your portfolio on the line.
If a company warns two-consecutive quarters in a row and is selling stock at the same time the overall economics of the business and management’s honesty should be questioned.
The discrepancies existing between the lowest and highest FWD sales and earnings figures should be examined. If a large spread exists then you’ll have to figure out which range is more likely based on your own DD. Taking into consideration how many times the Street has been “surprised” (either upside beat or downside miss) by the company in recent quarters, you might be able to draw parallels as to how much the company will beat/miss in the near future, and thus be able to arrive at a less narrow range of estimates that those put out as a Street consensus by analysts.
Near expiration options which lie close to an earnings call are often too pricey due to the fact that the options market factors into them an anticipated acceleration in volatility in the immediate future. And you might bet the wrong side, or you might bet on the right side but the movement might take longer than the amount of time remaining till expiration (thanks to the big boy hedge fund dudes and their crook MM pals and floor boys on the exchanges). Thus, longer term options (LEAPS) are more advisable, especially when you’re laying a large part of your portfolio on the line.
posted by Raphael Blogger at
3:36 PM
