Don's openings Part 4

TonySanDiego · Aug 24, 2002

Nitro,

I am asking because I can't see where Beta comes into Fair Value.

I thought Fair Value was... well.... Fair Value.

I can see where Beta would be a factor in how far and how fast it moved after it started trading, but I don't see the Beta effect BEFORE it starts trading.

That is why I asked the question.

I have certainly looked at this, I just don't quite see it.

Anybody else?

wan2BTrader · Aug 24, 2002

Originally posted by TonySanDiego
Question for Don, Robert or anyone.

Why is a stocks Beta a factor in determining the Fair Value of a stock?

Thanks,

Tony,
My understanding is that Beta is price change of your stock relative to price change to market (mostly S&P). If S&P go up by x%, your stock normally would go up by Beta * x%, so this is the fair value of your stock.

OPTIONAL777 · Aug 24, 2002

Originally posted by Don Bright
OK, let's get started with a new thread...August 21 opening......

BTW, I'll be in Denver to speak to some Technical types tomorrow night, and at the Sheraton West on Saturday if anyone is interested.....check the website..

Don

Why not just run the ad in the forum? How blatant can anyone be...starting a new thread to pump a paid seminar---which will no doubt be filled with pumping Bright Trading???

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Limited seating...Limited to those who pony up the jack....

vikana · Aug 24, 2002

Originally posted by TonySanDiego
Nitro,

I am asking because I can't see where Beta comes into Fair Value.

I thought Fair Value was... well.... Fair Value.

I can see where Beta would be a factor in how far and how fast it moved after it started trading, but I don't see the Beta effect BEFORE it starts trading.

That is why I asked the question.

I have certainly looked at this, I just don't quite see it.

Anybody else?

BOHICA: beta is not involved in calculating fair value for the SP. Beta is used to adjust for individual volatility relative to the S&P. Here's a good link with explanation:
http://www.programtrading.com/fvalue.htm

Also, this has been discussed 100s of times in the past. Just search and theres a lot of background info.

TonySanDiego · Aug 25, 2002

wan2BTrader,

Thanks,

That makes some sense.

In my real world (admittedly limited) experience, I have had some unpleasant experiences with high Beta stocks, hence the question.

I have had high Beta stocks get very skewed on gap days. Skewed to the point that, as an example, the short opening price was very near or BELOW the previous close. Then the stock opened up a bit, I get filled short on the open, then it takes off UP.

That is why I wanted to know how or if the Beta really had anything to do with where a stocks FV should be.

Vikana,

I have read all the threads on opening orders. Now, perhaps I missed it, but I do not recall seeing an explanation of what I was asking.

If I had a couple of years experience with opening orders, I am sure I would not have to ask.

Thanks,

rtharp · Aug 25, 2002

Originally posted by daniel_m

Doesn't the stock have to open on an uptick for you to get filled short?

Are you saying that if ABC closes @ 50, and that was an uptick, you could get filled short @ 49 on the open?

yep

rtharp · Aug 25, 2002

Originally posted by mrktwiz
This was posted on the old DOn's Opening#3 string and I would like to see if anyone has a answer to thsi question posed;

RE> OO will be less effective until SEPT
Opening orders are being manipulated heavily by the specialists due to lack of volume.

Smart traders are either not doing OO or being very specific.

FYI

What littel I know of the OO strategy I don't see how "all of the sudden" it is going to stop working overall, maybe you might have certain stocks that you need to either add or delete from your daily list, but everything just "stopping working" ???

I don't get it?

Confused and need help....

mrktwiz

They still work fine

rtharp · Aug 25, 2002

Originally posted by TonySanDiego
Question for Don, Robert or anyone.

Why is a stocks Beta a factor in determining the Fair Value of a stock?

Thanks,

Tony

beta is just the amount the stock moves in relation to an index

If the S&P's are up 10%

that a stock with a beta of 1 should be up 10%

if they have a beta of 3 they should be up 30%

If a stock has a beta of .05 than it should be up 5% and so forth.

I make money on high beta, low beta and equal beta stocks all the time. The high beta you must keep an eye on more.
They are higher risk......yes

but they are also higher reward.

You've screamed a few times about a certain high beta stock after being hurt in it (yet I reacted to the index and only lost .05 net) This same stock is one of my largest winners for opens yet after only one experience you said I'm never going to trade it again.

Robert Tharp

Don Bright · Aug 26, 2002

Sorry if the "beta" relationship was not explained further to you. This is a key to successful openings, much like seperate sectors can be. Many traders actually use different pages, with different stocks, on their automated openings. That way they can more easily modify their enveloping percentages to reflect a more accurate evaluation of "fair value" for the opening.

BTW, small opening today (8/26) break even.
Don

topmo · Aug 26, 2002

Originally posted by vikana
For C I had a buy limit at 35.39

C opened at 34.35 but I did not get a fill.

I used OpenOnly orders though IB. I thought they had to fill me since my order was marketable on the open.

Confused

You had a BUY LIMIT at 35.39, therefore you did not get a fill because the price DID NOT TOUCH your BUY LIMIT price of 35.39.