Archive for the ‘Tips and Strategies’ category

A case in which you should SELL…

March 26th, 2010

CASE 3:

TICKER: IBM (International Business Machine)

DATE: 080115 (January 15th, 2008)

TIME: 11:55 (11 hours, 55 minutes)

PRICE: 95.18 (american dollars)

WINDOW :<1 H (1 hour or less) PROB (+Y) 0.0588 (6% probability) +YIELD > 1.00 (Positive Target Yield Area)

PROB (-Y): 0.7834 (78% probability)

-YIELD: < -2.00 (Negative Target Yield Area)

PROB (~Y): 0.1578 (16% probability)

~YIELD: 1.00/-2.00 (Inter Target Yield Area)

EST_YIELD: -1.74 (-1.74% Opportunity Expected Yield)

Fact: IBM ticker, on February 7th 2008, at 11:55 hours, is quoting at $95.18 price.

Opportunity: In less than 1 hour, has a 6% probability of over performing 1% yield, a 78% probability of under performing -1% yield, and a 16% probability of performing between 1% and -1% yield. The overall expected yield is -1.74%.

Recommended Action: SELL.

When to HOLD?

March 26th, 2010

CASE 2:

TICKER: MSFT (Microsoft Corp.)
DATE: 080207 (February 7th, 2008)
TIME: 14:15 (14 hours, 15 minutes)
PRICE: 30.07 (american dollars)
WINDOW: <1 H (1 hour or less)
PROB (+Y): 0.0518 (5% probability)
+YIELD: > 1.00 (Positive Target Yield Area)
PROB (-Y): 0.032 (3% probability)
-YIELD: < -1.00 (Negative Target Yield Area)
PROB (~Y): 0.9170 (92% probability)
~YIELD: 1.00/-1.00 (Inter Target Yield Area)

EST_YIELD: 0.02 (0.02% Opportunity Expected Yield)

Fact: MSFT ticker, on February 7th 2008, at 14:15 hours, is quoting at $30.07 price.

Opportunity: In less than 1 hour, has a 5% probability of over performing 1% yield, a 3% probability of under performing -1% yield, and a 92% probability of performing between 1% and -1% yield. The overall expected yield is 0.02%.

Recommended Action: HOLD.

Another example of “BUY”

March 26th, 2010

CASE 1:

TICKER= MMM (3m company)
DATE= 080221 (February 21th, 2008)
TIME= 10:10 (10 hours, 10 minutes)
PRICE= 78.51 (american dollars)
WINDOW= <1 H (1 hour or less)
PROB (+Y)= 0.8823 (88% probability)

+YIELD= > 1.00 (Positive Target Yield Area)
PROB (-Y)= 0.0501 (5% probability)
-YIELD= < -1.00 (Negative Target Yield Area)
PROB (~Y)v 0.0676 (7% probability)
~YIELD= 1.00/-1.00 (Inter Target Yield Area)
EST_YIELD= 0.83 (0.83% Opportunity Expected Yield)

Fact: MMM ticker, on February 21th 2008, at 10:10 hours, is quoting at $88.23 price.

Opportunity: In less than 1 hour, has an 88% probability of over performing 1% yield, a 5% probability of under performing -1% yield, and a 7% probability of performing between 1% and -1% yield. The overall expected yield is 0.83%.

Recommended Action: BUY.

A “SELL/STAY” example

March 26th, 2010
If an opportunity arrives at 11:30 with a 75% probablitiy of targeting better than 1% yield, AND a 15% probablity of targeting less than -4% yield, AND a 10% probability of targeting between 1% to -4%, all in less that 1 day time frame, then SELL /STAY OUT the security. Cause the expected gain of the opportunity is -0.10. (0.75 X 1 + 0.10 X -2.5 + 0.15 X -4).

An example of “BUY”

March 26th, 2010
If an opportunity arrives at 14:45 with a 75% probablitiy of targeting better than 1% yield, AND a 15% probablity of targeting less than -1% yield, AND a 10% probability of targeting between 1% to -1%, all in less that 1 day time frame, then BUY the security. Cause the expected gain of the opportunity is +0.60. (0.75 X 1 + 0.10 X 0 + 0.15 X -1).