Free
Message: Re: Robinhood Impact on LAC

Jun 08, 2020 02:21AM
2
Jun 08, 2020 10:41AM

Jun 10, 2020 11:05AM
1
Jun 10, 2020 11:21AM
3
Jul 07, 2020 03:04PM
3
Jul 07, 2020 03:56PM
1
Jul 08, 2020 06:59AM
3
Jul 17, 2020 03:08AM
1
Jul 31, 2020 04:39AM
1
Aug 15, 2020 02:46AM
1
Cal
Aug 15, 2020 09:07AM
1
Aug 15, 2020 10:52AM
2
Aug 15, 2020 02:41PM

Aug 15, 2020 11:24PM
1
Aug 16, 2020 02:57AM

Absolutely agree with almost everything you said, Pavel, except for that last short paragraph:

"Everything is possible, assuming that FED will continue to print new money. Once they stop, the party is over. No more subsidies to EVs. My answer to this is a rolling “stop loss” order maybe 15% below current LAC price to protect recent gains. Cheers."

Regarding the recommendation for a rolling "stop loss" order:  I too share the belief that the current rapid increase in Share Price is built on pumping and high expectations as opposed to being solidly undergirded by concrete advancement by achieving real Milestones in the long journey transitioning from "development" to "production", both in regard to Cauchari-Olaroz and in regard to Thacker Pass.  "Hope" may momentarily serve as a genuine spur to a rising Share Price, but if Reality doesn't follow Hope in a timely manner then Hope evaporates and so does the inflated Share Price.  On that point we are in agreement.  We  both want to see LAC's Share Price take a significant rise upward, but one that is based on significant achievements by the company rather than by pumper speculation.

OK, after establishing what we agree on I need to go back for a moment and address your solution of using rolling stop loss orders.   Pavel, IF we don't see timely positive real achievements on the DFS for Cauchari-Olaroz and timely positive real achievements on the PFS as well as the release of and follow up on the DFS for Thacker Pass then this inflated baloon will "POP".  When and if it "POPS" the fall in Share Price will be precipitous... not gradual.  A gradual decline in Share Price would allow for execution of any Stop Loss orders, rolling or otherwise.  THere would be time for those orders to be executed and your profits would be protected.  According to your plan you would only "lose" 15% off the high Share Price.  That again is "according to your plan".  The problem with that plan is that in the event of a precipitous drop in the inflated Share Price it would happen so fast that all or most of the Stop Loss Orders would never be executed... the falling knife would blow right through the majority, if not all, of any such Stop Loss Orders.  Stop Loss Orders are only executed if there is time for someone to view your sub market Stop Loss Order as a "Buying Opportunity".  No one views a Stop Loss Order as a "Buying Opportunity" in a panic situation and those investors in that situation with a Stop Loss order are stuck at their starting gate ( more like a stopping gate ) holding their now rapidly declining in value Shares in their hands.

The only real protection in a scenario whereby the knife is falling is to have Protective Puts.  Those Puts increase in value as the air gushes out of the balloon.  The more the Share Price falls, the more valuable are the Puts.

As for using 15% off the current High for the mark... that might work well for Stop Loss IF the Stop Loss order achieves execution in a reversal of the Share Price...but the reversal has to be slow enough to find someone who perceives the situation as a "Buying Opportunity".  When using the alternative strategy you have lots and lots  of "Options", so to speak.  Fortunately LAC Options are now offered in the U.S. and, probably elsewhere as well, but certainly here for U.S. investors.   I checked this morning with TDAmeritrade and discovered that they do offer Options.   They have Puts and Calls with Expirations at 5,33,96 and 187 days out.  All Expiration dates offer Calls and Puts at $ 2 1/2, $5, $7 1/2, $10.  96 day out and 187 day out Options also include Strike prices at $12 1/2 and $15.

So you have multiple possibilities.  The farther out the Expiration Date and the Higher the Strike Price the more expensive are the Puts.  I view Protective Puts as protection against Catastrophic Loss in Share Price, i.e. the baloon has burst!  With that view I go for the cheaper Puts, in this case the $2.50 Puts.  In regard to the Expiration Date, I want at least 6 months out so that would steer me to the 187 day Expiration Date Puts.  Sure, they are more expensive, in general, than those with a shorter Expiration Date, but I acknowledge that there may be some positive concrete development occur in the short term that could keep Share Prices up or even inflate them higher.  On the other hand, I am using this strategy as "Insurance" only, so if an untoward event collapsing Share Price does not occur then I am only out the cost of my "Insurance".  It is a balancing act, obviously.

I am attracted, currently, to the $2.50 Puts that Expire in February 2021.  Looks like I am the only one attracted to those Puts, because the Open Interest on them currently is ZERO.  The Highest Open Interest is on the $5 Strike Price Puts for the same time period:  Feb 2021 and the Open Interest on them is 262 Contracts.  The Bid on those Puts is $0.50 and the Ask is $1.05.   That is WAY, WAY too expensive for my taste.  It reflects more a philosophy that LAC will Crash and Burn ( Well, Crash anyway... maybe not "Burn").  That does not jive with my viewpoint.  I only want protection against catastrophic demise... against the ballon bursting.  So I can go "cheapeer" and still have the Insurance I desire to protect at least a portion of my current "profits on paper".

OK, so looking at the 187 day Puts at $2.50:  Bid is $0 because there is No Opien Interest and Ask is$0.30.  Last transaction price was $0.15.  So, I probably could put in a Bid at $0.20 and find a seller.  That turns out to be $20 per 100 shares controlled, which means $20 per Contract.  So, how much to protect 1,000 Share of actual stock in LAC if I used this strategy?  It would be $200/1,000 Share "Insured" and I would insure it through the Expiration date in Feb 2021.  The nice thing about this is that I don't have to wait until the Share Price goes below the Strike Price to see an increase in the value of my "Insurance Policy" because the value increases as the Share Price drops from its current High of nearly $8 per Share.  Of course, the idea is that I don't really want to make money off of my Insurance Policy... my preference is that the Share Price continues to advance upward and that I lose entirely the cost of my Insurance Policy since ideally I will never need to cash it in.  It is, after all, just "Insurance".  It is the cost of doing business is another way to look at it.  It isn't something you would use when your paper profits are 10 to 20%.  It is something you think about when you are looking at 100%, 200% paper gains or more.  The faster those paper gains go up the greater the paper loss is if the ballon gets punctured.  In that scenario you want to at least consider "insurance".  Rolling Stop Losses or regular Stop Losses do not provide the  same assurance and, in fact, they are a sand trap of reality should the falling knife scenario be in the future of your chosen stock.

Have I done this yet?  Nope.  As I mentioned, it is something I consider when I see 100%, 200% or more paper profit.  I am at the considering stage now and the faster and higher the Share Price is the greater is the pressure for me to execute some Insurance.  Just like with car or home insurance, you don't have to insure at 100% replacement value.  You don't want the cost of the Insurance to be so high as to be a burden not compatable with your paper profits.  So, going back to Pavel's 10-15% guideline on Rolling Stop Loss orders... I think that is a fairly decent guide line for purchasing Protective Put "Insurance" as well.. plus you get a better value since yo don't have to worry about the "Falling Knife" scenario with the Protective Put.    Acutally, I am quite comfortable in limiting it to 10% of the current paper value fo the stock, so in today's case for LAC that would be a limit of 80 cents per share for 6 months Insurance protection and, as you can see, I could purchase that for quite a bit less than 80 cents per share.

Best time to buy Protective Puts:  When the stock has achieved a new High and then pulled back a bit, maybe 5 to 10 %.  If it pulls back too much then the Put price may actually go Up.  Just follow the Option Chain on a daily or , at least, weekly basis so you will quickly recognize which way the Bid, Ask and Open Interest are going so as to make the best decision on when to buy your Insurance.  Fully insured is definitely "Expensive".  It makes more sense to think about insuring 50% of your holdings and the cost is quite a bit less.  If you decide to insure 100% then you should do so only if you are absolutely convinced that something is going to let the air out of the balloon.  Personally, I think that absolute conviction of impending doom is something only Bashers trade in and/or Fortune Tellers.   JMO    Cheers to all.   Okiedo

1
Sep 13, 2020 06:20AM

Sep 30, 2020 02:51AM

Cal
Sep 30, 2020 10:27AM
Share
New Message
Please login to post a reply