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Old 10-12-2016, 01:47 PM
capainter capainter is offline
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Short term play thread

I'm usually in and out of stocks within 3 months and usually play options. Figured I'd post what I'm up to in case anyone is interested. None of these are long term plays unless stated.

VG - Vonage, share price ~ $6.40 on 10/12/16
$7

Vonage has 3 main business segments.
1. Home VOIP services (their original business plan, think "woo woo, woo woo woo" commercials, and $15 monthly home phone lines). This business is essentially AOL where people are paying $15 a month, 5 years after they signed up for the service because they are too lazy to quit. They barely spend any money on this, and don't really market it as home phones are so out of fashion. But, it serves as a cash cow and this segment along makes the company profitable.

2. Business VOIP services. Most businesses now pay up for broadband internet and then save $ by running their phones through that broadband. Vonage is one of many providers that sell this service. Vonage has primarily focused on growing this higher $$ value, higher margin business. They have name recognition but are not necessarily the leader in this, but they're selling it hard and growing.

3. (Most critically) This company bought a company called Nexmo back in June. Nexmo is the #2 to Twilio, with about 1/2 its revenue and similar growth, but the next competitor after that is well below Nexmo's revenue. TWLO and Nexmo have both predicted that these two will emerge as the leaders in the space, which is basically integrating phone, text, video chat, etc. into apps and websites, although TWLO definitely has the momentum right now, but Nexmo's growth is also very rapid, which is what we care about for this trade.

This is the first quarter that VG has owned Nexmo, as the transaction closed at the very end of June. I love to play earnings immediately post acquisitions. The players are very focused on execution and will literally do everything they can to show the market that it was a "good deal." This usually entails jamming revenue into the quarter and overpromising on guidance. Put that together with the massive rally that TWLO has had (went public around $1B value, now has $4.3B value) and compare it to Nexmo, which was bought with ~50% of TWLO's revenue, for $230M. VG alone only has a market cap of ~$1.4B, with the added bonus of being profitable.

You're left with a value and a growth play in one here. As more and more people notice TWLO, they will connect the dots and see that VG is the play if you don't like TWLO's insane multiples but want exposure to the space.

I have no idea how VG will execute long term and I don't care. I just know that they'll put up a good quarter (earnings release 10/26) at least as far as Nexmo is concerned, which is all that really matters, and probably have a nice rally between now and the end of the year.

Playing $7 Nov 18 2016 calls and $8 Mar 17 2017 calls. Will look to exit the Novembers pretty quickly after earnings and hold the March's longer term.

Always consider that especially for short term plays, broader market forces outweigh the quality of your stock picking.

Last edited by capainter; 10-12-2016 at 01:58 PM.
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Old 10-20-2016, 06:15 AM
LittleDude LittleDude is offline
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Hey Capainter,

Thanks for the post. I've read it over for the past few days and have done some further reading on Vonage.

Can you briefly explain to me more about options trading. So basically are you betting that on Nov 18 the shares will be at $7.00 or higher? And on that date does a trade automatically get executed?

I've read a bunch about them but still confused with the covered calls and basic orders and what not.

Looking forward to your response.

Thanks
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Old 10-24-2016, 11:29 AM
capainter capainter is offline
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Correct, that is the bet. A trade would automatically get executed, but there is a market for options (albeit less liquid than for normal shares) that runs alongside the shares. So you don't need to worry about actually completing the transaction involving shares a a bunch of capital. You just resell the options once the price of the stock goes up (and the value of the options)

Basically, it lets you use a lot of leverage to boost returns, but if you don't hit both the timing and direction of the move, you lose most or all of your position. These aren't covered calls, that would be the process of selling options (collecting a small premium then taking on the risk of the stock going up) that you already own shares of (the "covered" description).

There are a ton of ways to use options to hedge your positions, bet on or against certain events, with varying degrees of risk and sophistication.

What I do is the simplest form, buying call options.

Vonage Holdings Corp. (VG) Option Chain - Stock Puts & Calls - NASDAQ.com

This shows you the options that are available. This is a bad example because there isn't much liquidity, but look at the "ask" price for a gauge of the market. In this case you pay $.20 per shares for $7 November calls. So at $7.20 you're even. $7.40, the option is theoretically worth at least $.40 so you've doubled your money. $8, its worth at least .80 so you've made 4x your money. The price of the option will track the share price on the way up, plus a premium on top of that gap (between strike price and share price) for the remaining time left on the option.

The easiest way to figure these out is to trade them. Make an optionshouse account and practice paper trading to get the feel of it. But think of them as like +500 type bets. They are tough to hit, but when you do you make up for the losing trades, plus some.
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Old 10-25-2016, 07:23 AM
LittleDude LittleDude is offline
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Thanks for the explanation. I have always wanted to learn more about options investing and I like coming to the stock forum and see what others are talking about. I just wish more people used it.

So basically a contract is 100 shares correct?

And basically if you think the stock will rise you are buying a call? If you think the stock will fall you are selling to close? Are these the two actions you primarily do?

Then on Nov 18 in this case, the option is called and if you make money the trade is executed automatically and if you have made money it just goes into your account? And vice versa?

Also, how does this work for tax purposes. Is it treated like a short term gain?

Any other stocks or sectors you are looking at right now. The market valuations are sky high. I believe we are definitely in for a significant correction after the election. However I also believe that we have some cool innovations in the pipeline that will create a new bull market in the future. Specifically, I think virtual reality and autonomous vehicles are going to drive the markets up. Also I think internet retail still has tons of room to grow. Just my macro take on things.

Looking forward to your response.
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Old 10-25-2016, 11:57 AM
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Quote:
Originally Posted by LittleDude View Post
Thanks for the explanation. I have always wanted to learn more about options investing and I like coming to the stock forum and see what others are talking about. I just wish more people used it.

So basically a contract is 100 shares correct?
Yes

Quote:
And basically if you think the stock will rise you are buying a call? If you think the stock will fall you are selling to close? Are these the two actions you primarily do?
No, buy to open a call if you think it will go up. Sell to close to exit position.

Buy to open a put if you think it'll go down. Sell to close to exit position.

Quote:
Then on Nov 18 in this case, the option is called and if you make money the trade is executed automatically and if you have made money it just goes into your account? And vice versa?
Trade will only be executed if you have the funds in your account, and it'll charge you a fee to exercise the option. OTherwise your broker will autosell the option for you at market. You need to watch it closely and sell before this time.
Quote:
Also, how does this work for tax purposes. Is it treated like a short term gain?
Correct. Generally speaking it's taxed at your normal income rate.

Quote:
Any other stocks or sectors you are looking at right now. The market valuations are sky high. I believe we are definitely in for a significant correction after the election. However I also believe that we have some cool innovations in the pipeline that will create a new bull market in the future. Specifically, I think virtual reality and autonomous vehicles are going to drive the markets up. Also I think internet retail still has tons of room to grow. Just my macro take on things.

Looking forward to your response.
I agree with this. Debt is so cheap and will be for a long time, so it sort of skews normal market expectations though. Not so sure we see a post election crash, probably something else that triggers it (still trying to figure out what, most likely China-related).

NVDA king for those kind of technologies. Great company/long term hold. GOOG/FB/AMZN aren't going anywhere I hold all three long term. Read my post on TSLA in the stocks to short thread. Don't like it.
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Old 10-26-2016, 09:12 AM
capainter capainter is offline
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Quick VG update. Don't have a ton of time to type but earnings were good, not great. I listened to the call. The CEO doesn't really do a lot for me but he's not the worst I've ever seen, either.

Secret is getting out on Nexmo. They honestly haven't accomplished all that much with it yet, but growth potential is good. Went from 130,000 to 170,000 developers since June, which is eseentially the pipeline of the company's revenues. Good progress on the traditional Vonage business which is a welcome surprise.

Stock running to about $7 as of right now. Clearly was some strong upward pressure on the stock. This usually doesn't die out within hours or even days, but again you never know.

I'm taking profits on 1/3 to 1/2 of my November position today and holding the rest for another few days, potentially longer.
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Old 10-26-2016, 09:40 AM
LittleDude LittleDude is offline
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Great call on Vonage. I have been following all morning.

So, I guess my last question is why are betting on the Nov call, as well as the March call?

Why not, the December call?

Also totally agree with you regarding NVDA, GOOG, FB, and AMZN.

What about Mobileye MBLY? Too overvalued or room to grow?
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Old 10-26-2016, 10:24 AM
capainter capainter is offline
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Thanks LittleDude. Great day, the odd thing is that the earnings were sort of "meh" in my opinion. Nexmo segment didn't beat on revenue nor did they raise forecasts (which is what I was predicting/hoping for).

In this case, December call lacked a stock specific catalyst, whereas they included a few market wide catalysts which I want to minimize exposure to (election and rate hikes).

November options give you earnings (today) and March includes another set of earnings in late February/early March.

I'll look into MBLY, don't follow that one.
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Old 10-28-2016, 09:46 AM
LittleDude LittleDude is offline
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I have to do more research on MBLY as well. They basically make advanced driver assistance programs. They are a leader in "self driving" technology.

I do know that they have dissolved their relationship to Tesla. I read that the death resulting from the autonomous Tesla crash was due to a failure on Mobileyes end. However, I also read that they initiated the breakup because they felt that Tesla was pushing too hard, too quick to get the product to market.

So, who knows. Tesla is now saying they will come up with their own software, but many think they are quite behind. Mobileye has teamed up with GM and BMW, as well as others and has some proprietary software.

They have a 8 billion market cap. Buyout potential as all these other companies scramble to get a product to market?
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Old 10-28-2016, 01:17 PM
LittleDude LittleDude is offline
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Also, what is your current take on twilio, TWLO?

Shares have come down quite a bit since they had a second offering at $40. Shares are down to $35, cut in half from its early run up.
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Old 10-31-2016, 10:26 AM
capainter capainter is offline
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Ended up making about 40% on this trade. Could have been much better, I held a portion for too long and broke even on it. I had 200%+ gains at one point. Closed out this morning. I'm not holding the March options through the election.

I bought Nov 18th 205 SPY puts this morning @ $1.20. SPY currently at 212.7 or so. Stop loss set at $1.00 which is SPY~$214. Nice thing about these options is that they've very liquid so you can set stops like you would on normal shares.

Going to be a volatile couple weeks with the election coming up and jobs report on Friday, don't think anyone is buying into this, upside just isn't really there, as Hillary is priced in.

I do think Trump will win, but I'd like to avoid playing that event if possible and just play the scare leading up to it. I think you start to hear a lot of "if Trump wins your 401k will plummet" talk, accompanied by a drop in the market.
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Old 11-01-2016, 11:59 AM
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SPY around 211.10.. trade going well, looking for more.
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Old 11-02-2016, 09:19 PM
capainter capainter is offline
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Quote:
Originally Posted by LittleDude View Post
I have to do more research on MBLY as well. They basically make advanced driver assistance programs. They are a leader in "self driving" technology.

I do know that they have dissolved their relationship to Tesla. I read that the death resulting from the autonomous Tesla crash was due to a failure on Mobileyes end. However, I also read that they initiated the breakup because they felt that Tesla was pushing too hard, too quick to get the product to market.

So, who knows. Tesla is now saying they will come up with their own software, but many think they are quite behind. Mobileye has teamed up with GM and BMW, as well as others and has some proprietary software.

They have a 8 billion market cap. Buyout potential as all these other companies scramble to get a product to market?
I just saw this, not sure how I missed it. Frankly I wouldn't mess with Mobileye right now. Seems to have a lot of headwinds and I'm not sure I'm completely sold on the driverless car concept ATM given where we are technologically. Long term it may be great, but that is more my trading style than anything. Without a short term catalyst I don't have much interest.
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Old 11-02-2016, 09:22 PM
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Quote:
Originally Posted by LittleDude View Post
Also, what is your current take on twilio, TWLO?

Shares have come down quite a bit since they had a second offering at $40. Shares are down to $35, cut in half from its early run up.
I like TWLO a lot actually. Pretty clearly the leader in what to do and pretty clearly a growth story without many headwinds.

Unfortunately the IPO value was so high that I think it's a sub-$20 stock before it's a $50 stock again and even with that value they're already back for another offering. Without looking at any actual financials, I doubt they're that hard up for cash, rather they realize the value is still too high and want to raise cash at that valuation.

Last edited by capainter; 11-02-2016 at 09:25 PM.
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Old 11-06-2016, 04:14 PM
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SPY puts still in play.

Probably a big green move tomorrow morning for the index. Will buy more puts and watch it burn when election goes Trump.
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Old 11-09-2016, 01:35 PM
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Just a brutal turn of events for me. Got absolutely skinned on this trade, market up after futures being down 4-5%. Would rather he'd lost!!
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Old 02-13-2017, 04:43 PM
capainter capainter is offline
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Planning on entering a long position in BOX ahead of earnings on 3/1.

At ~18.20 now, probably buy $20 March calls. Will explain more later.
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Old 02-13-2017, 08:02 PM
skidmarkymark skidmarkymark is offline
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Short term play thread

Enjoyed your thread, looking forward to your explanation.

I'm looking at American steel companies but thinking I missed the train.
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Old 02-14-2017, 12:23 PM
capainter capainter is offline
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I always thought of BOX as basically a cloud storage solution that was geared more towards enterprise than consumer (where Dropbox is the leader as far as I know). Without question, there is endless competition from deep pocketed firms in that space. However it's very obvious that BOX has figured out how to provide wider, more useful solutions for their customers, meaning that they're integrating multiple systems/products (even other cloud storage solutions) and processes and it's more of a platform than a storage solution. The business model is very sticky. The build outs are highly customized. To leave the platform is not as simple as switching from AWS to Google for your cloud storage, for example.

That's all well and good, but frankly, they're spending like mad to chase deals and revenue, and probably not doing anything truly proprietary enough to be the "next big thing". However, I do think that people are always looking for the next big thing and this is a story they can get behind. It's still below it's IPO price.

-Constant, steady growth since IPO, yet priced below it (barely)
-Very sticky consumer base (churn is like 3%, or something tiny.. so at this point all new deals go straight to the top line without having to replace old deals)
-Whiz kid CEO.. very young, but very smart. Clearly knows the game for young tech companies (spend like mad to chase revenue, worry about making money later). He got Mark Cuban to invest in the business, starting with a cold e-mail.
-Still a reasonable valuation, although I think it'll start to get a little rich soon (I'll be out before then)

That stuff is all well and good too, but after a pretty big run up lately, they'll need to beat earnings and/or raise guidance to really pop. Two things:

-Rumors are out there that they've inked some large deals with some large firms during the quarter. Unsubstantiated, but AAPL supposedly did like a 35,000 user deal with them, IBM did another of similar size, and there is at least another one that is on the table which may be material enough to have an upward guidance adjustment by management.
-Business is booming, especially tech, and the election is behind us. Ever notice how every ad in Twitter and random apps seems to be for some other app? All these companies feed off of each other. AAPL, AMZN, GOOG, FB all near all time highs. Investment is booming. These companies can't hire fast enough. CEOs are optimistic and aggressive. The time to spend on IT and process improvement is now. Both in tech where alot of their customers are, and across the board.

Long story short:
-Shouldn't be hard to meet/beat street expectations for revenue (the metric that matters)
-Reasonable valuation given current state of the market
-Good story that people are just waking up too- just needs to catch a bit of that NVDA/TWLO hype to get carried away.

By no means am I recommending a long term investment here. That is a completely different analysis, however for the next 30-60 days.. I'll be playing this to rise to the 22-25 range.

Been some consolidation around 18 in the previous couple days. Will probably dip off that at some point before it goes up, but I'm going to start a position today and tack on if it drops.

60% March 19's for ~.45-.50 <- higher risk higher upside
40% June 20's for ~$1 <- lower short term risk, lower upside, more broad market exposure

Last edited by capainter; 02-14-2017 at 12:25 PM.
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Old 02-21-2017, 10:40 AM
capainter capainter is offline
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Finally getting in BOX options today. Grabbed June $20 calls for .80 each. Nice consolidation around $18 should be ready to fly once the quarter hits.
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Old 02-21-2017, 09:35 PM
skidmarkymark skidmarkymark is offline
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Short term play thread

Nice thanks for your insight, going to most likely look at starting a position in BOX. How far do you see a pullback? Could it drop into 17s you think?
Holding calls for AMD that could have a huge payoff after earnings. I hope. Trying to play the tech sector wave as well.

Sorry to hear about the SPY short but on the bright side I don't think anyone would have called this run. I was shorting gold right before brexit as all polls pointed to no. Well now we know never take any poll seriously.
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Old 02-21-2017, 10:13 PM
capainter capainter is offline
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Hard to say. It's held the 18 level for over a week and there haven't been any signs of weakness. I'm about 2/3rds into what my ideal position would be. Never a bad idea to buy half of what you want then add if it dips (or if it goes up). Thought it ran a little too far too fast when I made that statement but clearly this is a one way market for the moment.

Good luck on AMD. Know a lot of people have made a lot of money on that one. FYI their q4 2016 earning already happened if that was what you were trying to play.
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Old 02-21-2017, 10:34 PM
skidmarkymark skidmarkymark is offline
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Short term play thread

Oh yeah that's what I normally do, scale into positions. Just thinking if I should play the options or buy a solid block before earnings. So many analysts saying a crash is around the corner but nothing materializes ever.

No I'm after the Q1 2017 earnings on 4/20, long call. AMD has a new chip called Ryzen 7 that has been giving Intel a run for its money. Intel has become complacent as of late allowing NVIDIA and AMD to gain ground. The comparable Intel core is $1050 more than the new AMD. So waiting to see how the street interprets it once it's released. Looks to be good from the leaked info about it. At stock levels the AMD is slightly slower so it is rumored that once overclocking data is made available it should leapfrog its more expensive counterpart.
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Old 02-22-2017, 07:36 AM
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The biggest problem with the AMD chips is they tack on a bunch of bells and whistles and more silicon in order to maintain the same performance as the nvidia and intel chips that have superior architecture. So they run hotter and take up more space and power, but more importantly are more expensive to produce which results in bad gross margins and less profitability.

Not a fan of AMD long term, but can't argue with results. Incredible 700% run in like a year.
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Old 02-22-2017, 08:55 PM
skidmarkymark skidmarkymark is offline
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Short term play thread

Yeah you're right I think that was addressed in this recent upgrade or at least looking to reduce it. We'll see.

Weird drop on BOX, thinking it was pulled down by the sector. Overall chart looks bullish. Will watch to see if this drop continues. Two huge selloffs intra day but also a huge 30k buy toward the end of the day.
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