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Non-Tech : Interactive Brokers / Timberhill -- Ignore unavailable to you. Want to Upgrade?

To: Carl Worth who wrote (7365)	5/2/2007 8:23:02 PM
From: RockyBalboa	Read Replies (2) \| Respond to of 9012

Ok, after all a lot has been posted but as the originator of the "flat" thinking I may add a few comments. It is amazing to see that they nearly doubled the size of the IPO to close 1B at mid price. In my view, this is a little bit aggressive and takes out a lot of fire - personally I don't like the idea very much to go to the market buying something fully valued. Maybe, they decided - well if any of the exchanges trades at a 50PE and gets taken out, then our 30x is still "cheap" and 20x would be total mispricing. As for the lower than expected Q1 earnings due to their option hits. Some estimates put the hit in the 30MM range in Q1 alone, mostly driven by nonlinear developments in option prices. "Assuming" a steady growth in customer accounts and assets as well as the rising volume in option trading, the expected result would likely have been at the december 06 level or higher. Also keep in mind that they tightened the screws a little bit on commission caps for low priced stocks effective in Q1 and this also didn't really help. Historically seen from other brokers results, Q4 and Q1 are the best months and particularly Q3 is a slow time. On another thread I just posted a story regarding the options activity in DJ pre-announcement. ( Message 23508540 ) This is the type where the house can only lose unless they significantly reduce their market making in gamma bombs. It can be estimated through the excess number of traded options right ahead of a corporate announcement and applying IBs market share, on average. Having no assymetric information advantage the market maker takes a proportional hit. Being subject to an information disadvantage to a traditional wirehouse which can always quietly ask their market makers to avoid unnecessary risks they could even take a hit well in excess of their average market share - an adverse selection problem exists. Seen from the DJ example those are significant numbers of contracts (4000 in just 2 series, gaining more than 5MM in value that day alone. Now apply IBs market share of just below 20% then IB took a 1MM hit - or more if an information asymmetry exists).