Is FB P/e of 122 right? If so why wouldn't this be an obvious short sell?

Maticus · 4 days

No. Because the strike price was 220, if the stock goes above that it won't exercise meaning his max loss if the difference between the two put. On the other hand, if he had written a call then yes he could be on the hook a lot if it went to $500. A call is a right to buy a stock while a put is a write to sell at a given price is you are the holder. In the case you are the seller. A call is a right to sell while a put is a right to buy at the strike price.

Maticus · 5 days

Puts have an exercise price just like calls. If the stock price is above the strike price for a put then it doesn't execute. His max loss would be the difference between the put he bought and the put he sold times 2.

Joe_12265 · 5 days

The market is inefficient short term while efficient long term. The reason prices fluctuate is the thousands of investors across the world, using many expectations for many variables, using different models to value the same asset. The same reason you view an asset as being a certain value and the high probability that my opinion of that asset's value being different. Proof that the market is efficient is evident in currency exchanges and commodities. When every free money is available to be made, someone steps in and closes that gap until it is minimal.

Joe_12265 · 5 days

Hmm, that's a ridiculously stupid statement. In an efficient market the private/public, primary and secondary markets would value shares at the same price and the only reason for issuing stock would be for liquidity. An IPO would be to create liquid capital (cash). So to say an efficient market would mean that no investors would participate in an IPO is ignorant and shows a lack of understand of the functionality of capital markets.

Joe_12265 · 5 days

A 15% increase in buyers on a supply/demand basis will assure price support. Also, it will very high probability that at a "reasonably" priced offering they will make money. 15% isn't going to help anyone if FB at the same share commitment to be priced at $500 a share but my point is, in a general sense, underwriters can't lose money. That is t how the market should be. If they overprice the shares and lose money, efficient market theory states that over time their pricing strategy will get more accurate until it is efficient, otherwise all the underwriters who continually lose money will be bankrupt and gone.

ihatenuts · 5 days

As someone who started investing in high school, over the past 10 years of experience has taught me a lot. My finance degree helped as well. Thinking long term is the real key to investing. Trading is different. I invest 80-90 percent of my portfolio. The rest is play money is risky short term trades and options. I also believe in leverage and use options a lot to hedge my investments and sell at a fixed price when the volatility cloud is making it rain. The number one rule that has both cost me in losses at times and made me miss opportunities at times when not following it is this: BE DISCIPLINED! If you can defend an investment with rational reasons and financial analysis, stick with it. The market is and always will be short term inefficient. To use above's example, if KO lost half it's value tomorrow for no real reason (product isnt killing people, KO is still selling beverages) then buy buy buy. If it goes down more, buy buy buy. Eventually, it will rebound to its true value and you will be happy you stuck with it. I missed hundreds of thousand of dollars on AAPL, AZN, POT, and more because I didn't stay disciplined and got hesitant when it dropped further. It's hard not to get emotional with money but learning that lesson has also allowed me to have huge returns in companies like, VZ, RAI, DUK, HI. Good luck to you sir. Always remember "Bulls make money, bears make money, and pigs get slaughtered."

Joe_12265 · 5 days

I think the point you are missing is underwriters can't lose money in an IPO situation. In a greenshoe situation they can "borrow" shares to cover demand. If they have underpriced the shares and they increase during the trading day it should be a loss since they are effectively short selling. However, part of IPO agreements with underwriters states they have an option to purchase up to 15% more shares at offering price so if the stock falls due to selling they can support it by purchasing back the "shorted shares" at a loss of zero. If it goes up, they exercise their options and make hundreds of millions. Underwriters should have a responsibility to partake in the risk of an investment. That's what an underwriter does. The create validity for the offering stand behind the statements made in the prospectus. As an avid investor it really opens your eyes to how inefficient the short term market can be.

DamienCK · 16 days

After a second look it appears that my referenced passage was a direction to priests. So I humbly apologize.

DamienCK · 16 days

False. It's leviticus 21:5

Pryds · 2 months

Intent and execution are two very different things - UnemotionalWreck

NineFeetUnderground · 2 months

Just because they are a nun doesn't mean they are a virgin. You can choose to be a nun later in life after you have has sex.......

Toomanybeerz · 2 months

Me too!!

Toomanybeerz · 2 months

Toomanybeerz!! You are from my hometown! I always wondered if there were any Redditors around. If we get enough we could have a Reddit get-together!

CallofCthulu · 3 months

Yeah we are looking for someone with more experience at a beginner level price.......

CallofCthulu · 3 months

You brilliant bastard! My pup Toby just passed this class 2 weeks ago and I didn't think to grab some free karma for it! Well played sir, well played!

Unemotionalwreck · 4 months

That is just blasphemous!! Id do amazing things to that girl!

Unemotionalwreck · 4 months

I was in Miami for a football game a couple of years ago and was right on the red carpet as her and her sister were entering the stadium. Holy monkey are they hulking girls. I mean 6' and 180 lbs girls. Im a decent size man but I'm not so sure I could win a fist fight with those 2 linebackers. Definitely made me realize most tennis chicks aren't hot.

Unemotionalwreck · 4 months

Seconded. I'd kick 5 Navy SEALS square in the cajones to get with her!

Unemotionalwreck · 4 months

Fun fact is the middle daughter was actually older than Jessica Biel.

Unemotionalwreck · 4 months

Way to let go of the reins...

Unemotionalwreck · 4 months

I would like to also submit Leann Rimes. She always looks like she is squinting. Like she stared at the sun too long as a child and her eyes "stuck" like that. Well that and she needs to eat a sandwich.

Unemotionalwreck · 4 months

Another perfect example!! Not attractive at all! Everytime I see her, I just want to yell "Moley, moley, moley!"

Unemotionalwreck

TROPHY CASE

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