If you have been reading my daily thoughts and market observations then you know that I am a little obsessed with LNKD and its fairly silly price action…I am not going to debate the valuation because that would be a waste of my keystrokes, I am just going to state something that I deem to be a fact, that the site is useless and will go the way of Myspace in just a matter of time…..congrats to the founders and bankers as they got that IPO out just in time to hear the death-rattle of their business model. I am up 2.50 in the trade from last week (below) and I am going to take that exact amount and buy a July Put Spread.
TRADE: LNKD ($66.16) Buy July 60 / 50 Put Spread for 2.40
-Buy July 60 Put for 3.50 and
-Sell July 50 Put at 1.10
Break-Even on July Expiration:
Downside: btwn 60 and 57.60 lose up to 2.40, btwn 57.60 and 50 make up to 7.60, below 50 make full 7.60.
Upside: above 60 lose 2.40
AT SOME POINT THIS SUMMER I THINK THIS STOCK WILL TEST THE OFFERING PRICE. BUT AS ALWAYS THERE IS A SMALL FLOAT HERE AND HIGH SHORT INTEREST AND THIS STOCK WILL RUN AND FAST WHEN IT GOES, SO DEFINE YOUR RISK, AND RISK WHAT YOU ARE WILLING TO LOSE, THIS IS A SPECULATIVE TRADE.
Last Post June 12th 2011:
On Friday I posted (below) on LNKD and the possibility for volatility around Wall Street’s rating initiation of the company…..[private] I want to clarify one thing I stated that brokerage firms should initiate after 21 days…..they don’t have to and can do it whenever they want after 21 days, but those brokerage firms that were on the selling syndicate (lead managers and co-managers) have to wait 40 calendar days from the May 19th IPO to launch ratings, which should be on or after June 28th.
On Friday, I bought a June 70/65 Put spread for 1.40 for the potential of some lukewarm initiates but also because I still don’t like the market and am waiting for a near-term capitulation. I believe when this happens you will see LNKD come in quickly as their is no shortage of day traders and fast money in the name when you consider that on a float for 9 million shares that over 30 million traded on its opening day.
As I said on Friday I wouldn’t short this stock even if you could find a borrow as it is very expensive to do so, and the stock in it’s short little history is a bit oversold with very high short interest….If and When the stock breaks 70 early this week I want to close this spread out as it will begin to decay quickly. I will likely wait for the stock to bounce as I think the market will be close to a snap-back rally at some point mid week and this stock could see 80 on that bounce….So my point here is be nimble and move your feet.. This stock is likely to stay volatile so I am want to try to find the most optimal time to get in front of this event that could cause further downside volatility……..
ORIGINAL POST JUNE 10th 2011 @ 11am:
Wall Street analysts should be coming out of their 21 day quiet period on LNKD in the coming week and will begin to dream up all sorts of ways how LNKD will grow into its ridiculous valuation….As readers of this site know I don’t short stocks like this and I would never do it for the simple reason that it is too expensive (see NFLX). But that certainly doesn’t mean I am going to join the herd and buy them and then join the class action in a few years when the thing is at zero…… [private]
For those who want to short the stock it is very hard to borrow and expensive to do so, and obviously you face unlimited risk……So I will use options to make a tactical bearish bet and define my risk around events that I think should serve as a catalyst for the stock. I am not going to get into valuation and expectations to hit those targets, Business Insider did a great job of that here, what I am going to focus on the near term potential for a pull back based on luke-warm initiations by wall street firms that weren’t a part of the selling syndicate (BofA, JPM and MS). These initiations should come next week and cause some downward volatility….
The way I see it is not an issue of valuation because the stock will never grow into it, but more of competition, one word from Facebook about a professional offering and this thing is toast…think MySpace. This day will come, and again I don’t think this why you should short it here, but I have to assume that the street will lay out the bear case when they initiate coverage.
TRADE: This is purely speculative and I would only risk what you are willing to lose, but I am Buying June18 weekly 70/65 put spread for 1.40 (stock ref 72.40)
BUY Jun 70 Put for 2.35 and
Sell Jun 65 Put at .97
Break-even on June Expiration:
Downside: btwn 70 and 68.57 lose 1.43, above 70 lose all 1.43….btwn 68.57 and 65 make up to 3.57 and below 65 make full 3.57
RATIONALE: don’t want to put a nake short on here, stock could clearly pop and be back at 80 in a quick when and if the market stabilizes…. risk what you are willing to lose and define that risk….puts are expensive so look to spreads……
Stock is a little oversold and would prefer to wait for a little bounce to put on a longer dated trade.
Check back later today as I will post a trade in AUG playing for a move back to $45 ipo price….