I think you are generalizing a bit too much. I don't get where you assume all shorter sellers just put on a short position and hold til zero. I get Ackman's situation and that he kind of has to be in it for the long run b/c he mad such a public outcry that the company is a fraud. As far as traders go though, I think most traders look for a move, capitalize on it, and move on to another opportunity, instead of trying to make the "grand call" and hold on til the end . I never touched HLF, but when I do short companies and if I got a quick 15-20% drop in my direction, I would be more than happy to take that and move on. The goal is to make money in this business. With the price fluctuating so much in the past few weeks, it seems that there are a lot of people actively trading the price swings instead of a bunch of buy and holds and short and holds waiting for either zero or 100.
Herbalife (HLF) Exposed!
- Thread starter lwlee
- Start date
I think you are generalizing a bit too much. I don't get where you assume all shorter sellers just put on a short position and hold til zero. I get Ackman's situation and that he kind of has to be in it for the long run b/c he mad such a public outcry that the company is a fraud. As far as traders go though, I think most traders look for a move, capitalize on it, and move on to another opportunity, instead of trying to make the "grand call" and hold on til the end . I never touched HLF, but when I do short companies and if I got a quick 15-20% drop in my direction, I would be more than happy to take that and move on. The goal is to make money in this business. With the price fluctuating so much in the past few weeks, it seems that there are a lot of people actively trading the price swings instead of a bunch of buy and holds and short and holds waiting for either zero or 100.
Why would he trade european puts? I understand american calls because of the tender risk (which he will try to effect).
In case HLF blows up and netting the position. Path-dependency I suppose. Icahn's put buyers would be inclined to exercise (but can't) rather than net with another party at a loss of edge. The only way to force Icahn to cover would be if they were American. Of course he's go to post MTM "in the box".
I don't know why he didn't use an equity swap. Maybe sle will chime in.
I know. Sure not all shorters want to wait until HLF goes belly up. But there is also no way of knowing how many of them would cover on a dip like the one down to $31. And since the stock has been much lower, it is safe to say quite a few of them held on until it came back to their shorting price....
Now if some of them was reading this thread and my posts, they would have known where to cover...
I think it's because he wants physical shares on the upside in case he's successful in a takeover. He'd get voting stock. Otherwise he doesn't want to own physical shares. It would explain the position. He doesn't want stock unless there's a vote or tender to be had.
On the downside it probably helps that he closes the position and doesn't have to deal with selling stock into ackmans bids.
He wouldn't have gone so long dated if that were the case. Jan15 conversion is very tricky. He has to unwind the puts when he exercises his calls. This will be extremely expensive.
Icahn then sold European-style puts of corresponding expirations and size. European options can be exercised only upon expiration or the date at which the corresponding American calls described are exercised. <http://www.cnbc.com/id/100465961?__source=yahoo|headline|quote|text|&par=yahoo>
i thought european options could only be could only be exercised at maturity. the above seems to differ.