Hello friends.
We did not post about it, but we made some good trades based on the AMC-APE conversion. We bought APE below a dollar back before the news came out that announced the conversion would happen because we knew a headline of that nature was likely to occur soon and sold into the huge spike. After that, we waited for a while. We wanted to see a pullback. It didn't take long, as APE irrationally crashed after the big rally, and gave us yet another chance to buy cheap and sell into the coming rally.
Now the apes have given us yet another great opportunity of a similar nature to the previous trades. On March 14th, a vote is set to be held on the matter of whether APE shares will be converted into AMC shares. Since the price of APE is $1.87 and the price of AMC is $6.57, this is an important event.
My forecast for the event is very strongly in favor of a YES vote from shareholders. I think the odds of a YES vote are around 99%, with a 1% chance being saved for a NO vote in case something very major changes in the next 2 weeks. The reason I am so confident is that APE has far more shares than AMC does (there are roughly 1.8 APE units for each AMC common share), which gives them a massive advantage in the vote. On top of that massive advantage, a huge chunk of the APE shares has already been committed to voting YES, as Antara already said this is their plan. Antara Capital was sold 60 million APE shares by the company for a good price in exchange for their votes.
So, the news that we ALREADY know about, which hasn't even happened yet but very likely will, is "APE surges and AMC plunges following shareholder vote to convert APE shares into AMC shares"
Trading strategy:
We bought a lot of APE shares around these prices.
If we get the expected headline, we will sell our APE shares after the news has time to bake in (should push for 1-2 days). If we are wrong, we will immediately market-sell our APE shares for a big loss as the price will have fallen. We would also sell our shares right away if an announcement is made that says APE's conversion vote is being delayed beyond the start of the legal battle since we are less confident that it will succeed in that case.
Prior to the news if prices continue to decline, we will be buying more APE for even cheaper.
We are not shorting AMC, because all methods of shorting for this stock are high-risk and very expensive. Even buying puts is really a bad idea because the spread is massive and the volatility costs a fortune. Plus, puts are an imperfect hedge for holding long stock. We are only going to buy APE, which is what we did for the prior 2 trades as well.
When it comes to the legal battle that has bubbled up between Allegheny County Employees' Retirement System and AMC, we think (from the perspective of someone not highly well-versed in business law) that the lawsuit is garbage and will be thrown away. However, we also think that it will take a while, since the legal process is slow, which could pose risk that more APE will be dumped onto the market by the AMC team to fund their ongoing operating losses. We are not currently betting on this part, since we should have already sold our APE from the current trade by the time this all gets going. We could see another setup where, after a YES vote, APE shares start crashing due to bad press from the legal battle, which might present yet another opportunity to buy prior to the case being torn to shreds and the conversion going through.
A lot of the movement in AMC and APE has been and will continue to be based on major news events. Being able to forecast these news events before they happen can be extremely profitable. A similar example to a trade like this is when I went long on Dogecoin because I knew the odds of Elon Musk buying out Twitter at that time were almost 100%, and for whatever reason, Dogecoin still hadn't pumped. BOY did it pump when Elon fully bought Twitter and idiots started speculating about that. Most market participants are immeasurably stupid, so do not assume that just because something is obvious to you that it is priced in at all. "Nothing is priced in". - Me
We did not post about it, but we made some good trades based on the AMC-APE conversion. We bought APE below a dollar back before the news came out that announced the conversion would happen because we knew a headline of that nature was likely to occur soon and sold into the huge spike. After that, we waited for a while. We wanted to see a pullback. It didn't take long, as APE irrationally crashed after the big rally, and gave us yet another chance to buy cheap and sell into the coming rally.
Now the apes have given us yet another great opportunity of a similar nature to the previous trades. On March 14th, a vote is set to be held on the matter of whether APE shares will be converted into AMC shares. Since the price of APE is $1.87 and the price of AMC is $6.57, this is an important event.
My forecast for the event is very strongly in favor of a YES vote from shareholders. I think the odds of a YES vote are around 99%, with a 1% chance being saved for a NO vote in case something very major changes in the next 2 weeks. The reason I am so confident is that APE has far more shares than AMC does (there are roughly 1.8 APE units for each AMC common share), which gives them a massive advantage in the vote. On top of that massive advantage, a huge chunk of the APE shares has already been committed to voting YES, as Antara already said this is their plan. Antara Capital was sold 60 million APE shares by the company for a good price in exchange for their votes.
So, the news that we ALREADY know about, which hasn't even happened yet but very likely will, is "APE surges and AMC plunges following shareholder vote to convert APE shares into AMC shares"
Trading strategy:
We bought a lot of APE shares around these prices.
If we get the expected headline, we will sell our APE shares after the news has time to bake in (should push for 1-2 days). If we are wrong, we will immediately market-sell our APE shares for a big loss as the price will have fallen. We would also sell our shares right away if an announcement is made that says APE's conversion vote is being delayed beyond the start of the legal battle since we are less confident that it will succeed in that case.
Prior to the news if prices continue to decline, we will be buying more APE for even cheaper.
We are not shorting AMC, because all methods of shorting for this stock are high-risk and very expensive. Even buying puts is really a bad idea because the spread is massive and the volatility costs a fortune. Plus, puts are an imperfect hedge for holding long stock. We are only going to buy APE, which is what we did for the prior 2 trades as well.
When it comes to the legal battle that has bubbled up between Allegheny County Employees' Retirement System and AMC, we think (from the perspective of someone not highly well-versed in business law) that the lawsuit is garbage and will be thrown away. However, we also think that it will take a while, since the legal process is slow, which could pose risk that more APE will be dumped onto the market by the AMC team to fund their ongoing operating losses. We are not currently betting on this part, since we should have already sold our APE from the current trade by the time this all gets going. We could see another setup where, after a YES vote, APE shares start crashing due to bad press from the legal battle, which might present yet another opportunity to buy prior to the case being torn to shreds and the conversion going through.
A lot of the movement in AMC and APE has been and will continue to be based on major news events. Being able to forecast these news events before they happen can be extremely profitable. A similar example to a trade like this is when I went long on Dogecoin because I knew the odds of Elon Musk buying out Twitter at that time were almost 100%, and for whatever reason, Dogecoin still hadn't pumped. BOY did it pump when Elon fully bought Twitter and idiots started speculating about that. Most market participants are immeasurably stupid, so do not assume that just because something is obvious to you that it is priced in at all. "Nothing is priced in". - Me