Friday, July 10, 2009

Trade 25 setup - an unusual proposal

So my mate has gotten some rights to the new ANZ share purchase plan, and the oversubscription has lead to the dilution of EPS by 4% and this saw the stock fall about 50c in the last hour of trading yesterday, and the market opened up at 15.75 this morning.

The proposal was roughly to use my account to hedge 1000 QTY so that he can protect his downside, whilst offering 20% of the downside exposure, whilst eliminating any upside risk (with his underlying holdings).

The cost of transactions and interest is something that I will incur/benefit and it seemed like a good proposal, so I set up the trade at $15.76.

I suppose we are hoping for a technical exit around 14.95 mark, although the main purpose of the position is as a timing hedge, to take advantage of possible negative sentiment as well as probably market weakness over the next few sessions.