The new BBT & Suntrust: TFC ($55/$52.5 FEB 21 PUT CREDIT SPREAD)
'The good':
A 'mega' merger of banks in late 2019
Right after I declared 'buy BBT' via a gann chart I will link (no longer works since bbt is unlisted and instead we have TFC as shown here)
I saw huge upside in BBT; NC is a great state (constantly growing via census data and has large innovation hubs in the 'triangle' RDU + Charlotte as a financial hub)
Part 1 of my '2020 vision' is to use bullish option assumptions on fundamentally screened plays depending on their IV: ER is soon so we have HIGH IV aka we wanna SELL premium here.
TFC has earnings JAN 16 but only about 2k OI total for feb 21 the nearest to 45 DTE options cycle we can target.
I think I like selling the 55 put and buying the 52.5 put for that feb 21 cycle for a net credit of about .7 risking about 1.8
This is slightly less than the (55-52.5)/3 = ~.833 credit we would like; but the POP is also higher than our expected 'weighted coin' payout for that of '.66' in a 'balanced' world since you would expect to get 1-your odds as a payout. and if we are getting 1/3 payout that means our odds would be the other two thirds if you understand what I mean.
Our PoP: .71 PoP50%= .85 and we want to manage at 50%
Our BE on that play would be the strike we sold minus our net credit: 55-.7 = 54.3
'The Bad':
Kelly weighting is negative implying we don't have an 'edge' here.
The 'fundamental screening' on this play is more on the underlying of BBT as I had previously done some decent analysis on that. However, mergers are 'supposed' to increase efficiency and broaden markets. We will see on that as it just happened in 2019!
'The Truth':
Manage your own risk
Much Love
GL HF
xoxo
Snoop
A 'mega' merger of banks in late 2019
Right after I declared 'buy BBT' via a gann chart I will link (no longer works since bbt is unlisted and instead we have TFC as shown here)
I saw huge upside in BBT; NC is a great state (constantly growing via census data and has large innovation hubs in the 'triangle' RDU + Charlotte as a financial hub)
Part 1 of my '2020 vision' is to use bullish option assumptions on fundamentally screened plays depending on their IV: ER is soon so we have HIGH IV aka we wanna SELL premium here.
TFC has earnings JAN 16 but only about 2k OI total for feb 21 the nearest to 45 DTE options cycle we can target.
I think I like selling the 55 put and buying the 52.5 put for that feb 21 cycle for a net credit of about .7 risking about 1.8
This is slightly less than the (55-52.5)/3 = ~.833 credit we would like; but the POP is also higher than our expected 'weighted coin' payout for that of '.66' in a 'balanced' world since you would expect to get 1-your odds as a payout. and if we are getting 1/3 payout that means our odds would be the other two thirds if you understand what I mean.
Our PoP: .71 PoP50%= .85 and we want to manage at 50%
Our BE on that play would be the strike we sold minus our net credit: 55-.7 = 54.3
'The Bad':
Kelly weighting is negative implying we don't have an 'edge' here.
The 'fundamental screening' on this play is more on the underlying of BBT as I had previously done some decent analysis on that. However, mergers are 'supposed' to increase efficiency and broaden markets. We will see on that as it just happened in 2019!
'The Truth':
Manage your own risk
Much Love
GL HF
xoxo
Snoop
he says that basically every merger in history is bad for shareholders because the board of directors is so interested in gaining whatever they are buying that they are not looking at 'what they are giving up' in exchange.
No investment banker, whose pay and bonuses is dependent on the closing of a major deal like this, will have a powerpoint that says 'this was a bad move, we are losing value in exchange for X'
So perhaps my assessment of ' However, mergers are 'supposed' to increase efficiency and broaden markets. We will see on that as it just happened in 2019!' was without looking into what was given up...
we must consider this going forward.
I still like BBT
but maybe buffett can teach us through his own learning experience with KHC about value