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Strategies & Market Trends : Calls and Puts for Income
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To: CommanderCricket who wrote (5496)9/30/2012 4:35:41 AM
From: dealmakr    of 5891
 
Hi CC,

"Dividend paying stocks don't make for profitable shorting"

I would think that the above has to be looked at from the perspective of can the company continue to pay that dividend, whats the possibility it will be reduced or eliminated and has the fundamental business model changed.

I love to play stocks that have been overly trashed by the market if I can perceive that they have a chance of turning things around. Its where I find that decent options premium can be gleaned from both sides puts and calls with higher vol to compensate for the risk involved. It doesn't always work, took a hit with EK & SVU, with SVU having an decent dividend and also the cash flow to back it up until the all hands on deck bell sounded and now they are fighting for survival.

I can name others where the dividend hasn't kept pace with the loss of capital over time and short interest has stayed about the same or grown. Its just about the perception of where the future lies.

It does make it more painful for those who are short to dig into their pocket and come up with the dividend payment and if things are too bearish without the whole story being played out they can be burned, but thats what makes a market.

"The change is how Aetna and the other insurance companies reimburse is what needs to be watched. That's the uncertainty."

I think that you nailed the whole QCOR storyline with that statement and wish you luck on your trade as that kind of sums up the risks involved. Keep us posted on how things work out.

Good Trading

dealmakr
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