Financial markets and trading

Originally Posted by ukrainian_CA

In an ideally efficient market, there is no arbitrage opportunities.
These arbitrage opportunies can exsist only when markets are not fully efficient, there is some information that some parties are not aware of :-)

Right, Kui?

Let me back up. A few more postings than I had expected so let me answer this question first and than get to answering Jeff's question.
For your question... YES.
Arbritrage is succesful if certain parties are not aware of certain vital info of a commodity, etc, etc.
Limitation to an arbitrage can also occur in certain high profile regulated bodies such as OPEC that set prices for all petrolium for member countries and industries. This invokes the Law of one price concept. YET... when it comes to certain by products of petrolium such as GASOLINE, supply and demand in different markets can give a trader succesful arbitrage. Limits to arbritage also occurs when there is no free trade agreement rule between to markets.
Arbitrage does work if certain buyers out there lack the ability to acquire/sell some particular item(s) in a different market for a good price opposed to an identical item(s) in their respective market.
This is how some arbitrage works in my world. Let me use a silly analogy to make my point.
Broker a has in his possession something I need(want). What he has in his possesion is worthless to him yet it is marketable outside his market control. After a negotiated bid/ask settlement is made on the value of such item(s), he expects a trade not in $US or Euro or YEN. He wants me to provide a specific derivative that is expensive in his market and cheap in my market. This works not only in goods (hard or soft), commodities, but also certain options not available or not yet valuable in a given market.
Analogically speaking, arbitrage would be a semi-truck full of mango's crossing into the Canadian border to deliver to broker/trader a who has in his wharehouse pallets of preserved bear gall bladders (to later broker in China) that I will trade with him. From there we take these items into familiar markets. We attempt to cut out the middle by placing ourselves there without intruding on each others market. Ask no questions, tell no answers in all our deals between each other.
Keep in mind that this is only one small facet in a bigger diamond that I operate around. In about 7-8 years I'll gladly hang my boots up, retire and do something totally different. 40yrs of age is my target, yet it could go for another 17 yrs til I hit 50. I'm thinking really of cashing in at 40 though. From there I wouldnt mind living in solitude someplace really really quiet.

Originally Posted by Jeff

Hi, I am sort of familiar with the concept of arbitrage, but I am never sophisticated in this area, at all. What do you think about this: If, say, CNOOC (HK: 0883; US: CNOOC), an oil company that is listed in both the US and Hong Kong, rose by about 2% yesterday after the recent drop in oil price. Do you think it'll make sense to buy CNOOC in the US now? Can this be considered as arbitrage?

In theory... YES. Keep in mind what Meesh has said. An efficient market will work fast to adjust the differential. How fast to you have to be? Like lightning fast. Keep in mind that other brokers/arbitrageurs with different intentions will be in the game against your target interests. You want to engage in arbitrage when the Hong Kong holding DROPPED 2% lower than the market closed value of the American Exchange markets. Sell your holdings at the next opening American value +2% before the adjustment of -2%(even trade) takes place.

I have to go on about this arbitrage concept Jeff. Remember our slight disagreement about investing? Where I considered it gambling whilst you did not? You can take advantage of teach others risk assesment/threshhold to influence brokered deals. Different philosophies in the market is a key component in trading and succesful arbitrage. A no brainer of course but worth mentioning.

Originally Posted by ukrainian_CA

G in PEG is the key.
Since the value of a company can be thought of as the NPV of all future earnings, the growth factor affects the company's value tremendously....

I would do so, i.e. play this ratio in new or developing companies, the risk of course that such companies dont go bottoms up. You cant count on all well established companies growing bigger than they already are. Growth IS the key. So good point Meesh and your latter assesment of certain growth prospects of the aforementioned companies/industries.

I have to go on about this arbitrage concept Jeff. Remember our slight disagreement about investing? Where I considered it gambling whilst you did not? You can take advantage of teach others risk assesment/threshhold to influence brokered deals. Different philosophies in the market is a key component in trading and succesful arbitrage. A no brainer of course but worth mentioning.

Yeah, that is one area that isnt gambling but you really do have to be quick/have great connections to take advantage. There is a sports equivalent where you can bet with 2 different bookies at different odds on the same event, guarenteeing you will win whichever way the event swings. I've found a few myself but generally dont have the time to go looking for them and tend to come across them by chance, though there are companies that scour the markets and sell the information on.

A good example will be in the Aussie open right now, these are perfect as the event can only go one of 2 ways, guy A or guy B will win. As the players tend to be of different nationalities its often the case that domestically they will be backed at shorter odds than elsewhere (meaning that the opponent will be at longer odds than he should be) for example 2 players who are generally considered evens to win may be both at 6/5 with their domestic bookies. This is a small difference on paper but it is a guarenteed 10% profit.

Not strictly related to the topic but the principle is similar and its certainly an interesting way to make money, though betfair will probably kill it in the long term

Well I had done a theory of what Moggi was doing or for what motive. I had theorized he influenced Football matches across the board in order to cut the risk in dealing with gaming houses.

definately plausable. Managers, chairmen and so on all have faster access to info and im sure a lot use it to their advantage, just not on the scale Moggi potentially did.

I know that a lot of Harry Redknapps close friends made plenty of money backing him at long odds to return to Pompey from Southampton. At the time they were backing him both teams chairmen and Redknapp all strenuously denied it and he was floating around 30-1 with about 10 guys ahead of him in the race for the job, a few days later and he was back at Fratton Park

http://finance.yahoo.com/q/bc?s=LRCX...=on&z=m&q=b&c=

This is why we sold at lrcx at 52-54 and kept short calls, (50 January07).
Risk/reward was too high, especially when considering that I work for this co.
and my future is dependent on their performance too.

Sigh... Let me get with market forecasts for 2007. I'm banking on a trend that hasnt failed for about the last 20-25 years. Keep in mind that near the ending of a 2 term US Presidency, we normally see a mini crash i.e. 1987 (Reagan), 2000 (Clinton), and perhaps another of this term. It has nothing to do with economic policies of any particular administration, but more so of the market cleaning the trash on its own. It just coincidentally matches the time close to the end of a 2 term Presidency. Perhaps in 2007 due to an over speculated market creating an exuberant environment? Its ripe time to thinning out the herd. My guess of course. I'm looking perhaps in March or sometime August-October. Again a wild guess, but I sensed some things of interest in what Bernanke has said recently.

To continue... let me sway a bit from the doom and gloom of the financial market and do a little deviation of the topic and talk a lil bout another market called calciomercato. I chose to do it here cause the other threads are full of wrong speculation and I prefer to do this with those who know how market forces and forecasts work (Meesh, Jeff, and Stez).
So here's one small bit of analysis to ponder on. With regard to Cafu... did we aqcuire him as we did Gila for the future prospect of this team? Its a trick question but something I have established as a possibility move by Milan. I'd like one, either, all three, or anyone else to come up with an answer to my "clue in" forecast. I'm hoping anyone of you have picked up on the reasons as I have to why Cafu is still with us and why we got him in the first place? Impress me and we'll analyze this question.

btw meesh... please tell me that the one day decline of LAM last week didnt affect you? I hope not.

Originally Posted by Kui

btw meesh... please tell me that the one day decline of LAM last week didnt affect you? I hope not.

Neah, it did not
Since I am diversifying out of it mostly and fixing gains with covered calls etc.
I cannot be affected much until we start losing business market share.

I knew that the management was thinking in December about mid.07 orders, that is their forecast of future orders. Since our business is intrinsically cyclical in nature it would be too stupid to hold on and wait for future upside from here. Plus, I knew I would have to start some remodelling in Spring elsewhere I had to plan for it. I think semi cycle will take us down maybe even more and ...
And at some point there will be a good entry point, sorry for the unintended pun.

Isn't this cyclical?
http://finance.yahoo.com/charts#char...urce=undefined

Originally Posted by ukrainian_CA

And at some point there will be a good entry point, sorry for the unintended pun.

Isn't this cyclical?
http://finance.yahoo.com/charts#char...urce=undefined

Sorry... for my tardiness at looking at this. Yes Meesh the trend here looks like high and lows between a 13-14 day perdiod. Seems the stock is very volatile this year as in comparison to 2005-2006. Currently the trend looks cyclical.

Originally Posted by Kui

Sorry... for my tardiness at looking at this. Yes Meesh the trend here looks like high and lows between a 13-14 day perdiod. Seems the stock is very volatile this year as in comparison to 2005-2006. Currently the trend looks cyclical.

lrcx used to be even more volatile with beta of 3.5 or something. It should be smaller these days, but still...

I must disappear for few days or longer. Hope will talk to you soon.

Originally Posted by ukrainian_CA

I must disappear for few days or longer. Hope will talk to you soon.

Disappear??? Is it about that "thing" we discussed earlier? Good luck to ya and I hope everything comes out well Meesh.