Tulipomania Blowoff Contest: Why and When will it end? Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Tulipomania Blowoff Contest: Why and When will it end?

YHOO 52.58

0.0%

Jun 26 5:00 PM EST

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Sir Auric Goldfinger who started this subject	8/11/2000 9:51:07 AM
From: Gersh Avery	Read Replies (1) of 3543

#2 The tulipmania stocks will drop 40% in 5 trading days starting on Monday. (I guess that if I'm lucky this will be #1) Why: The nature of the market has been undergoing a fundamental change. Until January, just about anything with a dot com name could be put out IPO and it would produce a feeding frenzy on the market. Nobody seemed to care about any kind of logic regarding prices of these kind of stocks at all. We have been shifting toward a logic within the market that actually takes into account such things as profitability and the likelihood of being in existence ten years from now. In addition there is the activity of larger players within the marketplace. Few folks think about the impact of hedge funds and international investment banking firms on our marketplace. One event that took place near the first of this year, was the closing of Tiger Management. Tiger tended to be short the irrational stocks within our marketplace. Tiger closing would have been one of the largest short coverings in the history of our marketplace. This by itself could explain the sharp rise in the stupid fluff dot com stocks at that time. Shortly after Tiger went into close phase Sorous went into closing phase also. Sorous tended to be long serious stocks. The main difference between Tiger and Sorous is that Sorous was just closing for a short while and then opening up again split up into several smaller groups. This could well to explain the fundamental shift in the market from the fluff kind of stocks into serious stocks. Now then .. that helps to set the stage for overall market movement. Now then .. some specifics. Hedge fund methods. One common method to latch gain from the market is by way of matched sets of stock-options. For instance: the expected direction of stock ABC is up over the next month. Therefore go long the stock and match the long stock with short calls. The prem. built into the calls discounts the stock entry price and locks in a predetermined gain as long as the stock does indeed go up. On the flip side .. if the stock is expected to fall then the move would be to short the stock and puts on the stock at the same time. When the above move starts to run against the fund, then a shift has to be made. For instance, if the stock had been expected to move up and it starts to run down, the hedge can come off the trade. Namely the stock can be sold and the calls can be allowed to expire worthless. If the move down intensifies then the reverse play can be put into place. i.e. short the stock and puts. Analysis of something called the point of Max pain can show where the majority of these moneys are hedged toward. As a stock moves through the month this point tends to follow as fresh open interest moves that point. As expiration draws near, one of two things takes place. Either the point of Max pain will tend to draw the stock price toward it or it will repel it. The direction of the movement will depend on how far off this point is from the actual price. The further it is from the point the more likely that it will act to repel. Max Pain figures for some of the tulipomaina stocks can be seen at this site : ez-pnf.com I believe that the market is at a place that these points will now act to repel these stocks down through expiration.

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next