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Anyone else reading the rush to IPOs from so many companies as a leading indicator of a market top?
by DevX101 8y ago
Anyone else reading the rush to IPOs from so many companies as a leading indicator of a market top?
- jurassic 8y agoAbsolutely. I won’t be surprised if this craters after the open, long before the rank and file employees get to see a dime.
- ses1984 8y agoI think above poster means it's an indicator of the whole market, not just lyft but other companies suddenly going for the ipo.
- empath75 8y agoYep. Stock market represents selling out to the dumb money. I wouldn’t put a dime into lyft
- FreedomToCreate 8y agoAre you going to short it?
- xiphias2 8y agoShorting is always dangerous. Put options are safer as they don't have unlimited downside.
- latencyloser 8y agoJust to add, a mildly more conservative/higher probability short would be a short call spread, can adjust the strikes depending on your risk tolerance/confidence. This limits upside but you no longer need to outpace theta, it's working in your favor on the sell side. The long put is more sensitive to timing whereas the short call spread limits upside returns. Trade-off depending on your goals. Edit: not to be confused with a short call, which has unlimited downside risk.
- smallgovt 8y agoIf one were to pursue this strategy, what's the quickest way to execute it? I called into my brokerage to ask, and they said it will probably be a week from tomorrow. Is there some lag after IPO's before the options market is established?
- shereadsthenews 8y agoIf you intend to actually delve into options trading you should seriously consider Interactive Brokers.
- smallgovt 8y agoThanks, is there an advantage to IB other than lower rates and an API?
- shereadsthenews 8y agoNo? It's a lot better than calling a broker.
- nickles 8y ago> Is there some lag after IPO's before the options market is established? The shortest dated, exchange traded options are weeklies. These expire on Fridays. I'd imagine you won't see volume there until at least Tuesday, though. In order to buy puts, someone needs to write them. Any reasonable seller will be delta hedging their position by shorting the underlying shares. Since equities settle T+2, it won't be easy to short the shares until Tuesday.
- maxxxxx 8y agoAlso, first understand what you are getting into. I personally have learned the hard way that options are a good way to burn a lot of money very quickly.
- latencyloser 8y agoI'm uncertain when the contracts will begin to be listed, but I believe the minimum is 5 days after IPO. Personally, there's quite a few unknowns that would deter me from entering this trade off the bat, as I don't usually trade IPOs. I don't really know what the short pressure on such a stock would be immediately after IPO. Ideally, I'd want an expiry less than 30-45 days away since I'm selling but, I'm uncertain that's enough time for this trade following IPO. I might execute it after seeing what happens at IPO for a few weeks or so. (edit) Of course, that may be far too late. Also, I think it would be a hot stock for people to trade against, so I expect the spread to be reasonable, but the pricing to be extremely aggressive, which means the potential upside may not be enough for me to want the trade. Options are all about timing, sooner may not be better.
- navigatesol 8y ago>unlimited downside Is the stock going to infinity before you can repurchase it really a concern?
- xiphias2 8y agoIf you look at it as a geometric Brownian motion (which is better model forstock prices than brownian motion), the probability of the price halving is the same as doubling. When you're shorting, you lose twice as much when the price doubles than when it halves. It's not infinity, but it's a huge difference, and volatility is your enemy.
- empath75 8y agoShorting is nuts because it could pop a crazy amount of money. Also it’s close to impossible to short an ipo.
- DesiLurker 8y agoDont, shorting is a losing battle against inflation. plus you have unlimited downside.
- oh_sigh 8y agoYou can structure your shorts to have limited downside
- pbreit 8y agoI hope shorts lose all their money. All of it. Fortunately, I think Lyft will maintain or rise so you will be losing money. Lyft is a good company in a difficult business. No one here should have any interest, financial or otherwise, in good companies deteriorating.
- icelancer 8y ago> No one here should have any interest, financial or otherwise, in good companies deteriorating. That's a very Elon-esque understanding of what short pressure does.
- pbreit 8y agoSo what does short pressure do and how does that relate to the sentence you quoted?
- warp_factor 8y agoCan you explain more by what you mean with it is a "good company"? It is not a good or bad company, it is a company which mission is to make money. Shorts help keep the stock market healthy by giving opportunities to investor to invest into overevaluated stocks. And honestly Lyft seems to be a perfect candidate for this.
- pbreit 8y agoProbably should have been steamrolled by Uber but managed not just to survive but to thrive. One key to success is that many believe the product is better, at least in part because riders and drivers seem happier. Very fast growing and huge revenues and gross margins. Along with Uber has pioneered a very successful and desirable transportation category. Good enough to complete a good, successful IPO. I don't see much health value in ability to short over-valuation.
- mooreds 8y agoI imagine you will, though, if you hold a broad market index fund.
- buzzdenver 8y agoWhich index is Lyft in? Not in S&P 500.
- mooreds 8y agoAgreed. But I imagine if you buy something like the total stock market index (https://investor.vanguard.com/mutual-funds/profile/VTSMX https://investor.vanguard.com/mutual-funds/profile/VTSMX) that Lyft would be included, since they try to buy every public US stock.
- palcu 8y agoI think you are wrong. Snap has been excluded from FTSE[0] indices, as well as from the S&P 500, based on the fact that they have a dual class voting structure. It will probably happen the same to Lyft. [0]: https://www.reuters.com/article/us-snap-russell/ftse-russell-to-exclude-snap-from-stock-indexes-over-voting-rights-idUSKBN1AB2TW https://www.reuters.com/article/us-snap-russell/ftse-russell...
- mooreds 8y agoActually, on line 885 of the constituents list on this page, it lists snap (so that would be part of the vanguard fund I mentioned): http://www.crsp.com/indexes-pages/returns-and-constituents http://www.crsp.com/indexes-pages/returns-and-constituents Not sure about Lyft, of course.
- xiphias2 8y agoWith the bond yield curve inverted VCs know that it's time to sell.
- what_ever 8y agoExcept that it inverted long after these companies had decided on their IPO timeline. I am sure everyone will be here with "I told you so" takes if the market does go down. But if it doesn't no one will remember these predictions.
- Spooky23 8y agoIt’s a pretty risky time to be in the market at a full allocation. I cannot imagine the 2020 electoral carnival and whatever shitshow emerges from Brexit will be taken well.
- iamaelephant 8y agoIt followed a steady trajectory towards inversion, a lot of people could have and did predict the inversion years in advance.
- gimmeThaBeet 8y agoThis Matt Levine snippet was relevant yesterday, it's more relevant today, it's probably going to be relevant every day. >On the other hand, if you bet that stocks will go down, you have some compensating psychic rewards. For one thing, occasionally stocks will go down, and you will be praised for your prescience in predicting the crash, and the people who were long will be mocked for their complacency. How smart you will feel! >For another thing, even if stocks haven’t gone down, you get to borrow psychically, as it were, against that future moment of glory. You can just go around sort of saying “this is unsustainable and eventually stocks will go down and I will be praised for my prescience,” and people will be surprisingly willing to say “yes that’s correct, I admire your hypothetical prescience.” Particularly since the 2008 financial crisis, financial markets—and financial media—have a strongly entrenched narrative of prescient bears and complacent bulls, a widespread sense that any rising market is suspect and that the cynical view is always the smart one. Once again, its strikes me as odd that so many people clamor to call the top so frequently.
- bitxbit 8y agoI would go one step further and say we are less than a year away from a global meltdown.
- anonymous5133 8y agoI think it has more to do with companies wanting to IPO when market conditions are healthy...as in good economy and investors willing to overpay for shares :)