ASX Stock Pairs Trade Journal

[SilverRanger]

Hmmm WOW/CCL does look quite good though - I was considering it this morning....CCL hasn't fallen...and you'd think any push on costs by WOW will be negative for CCL. Tough choice. This is almost a fundamental pairs trade rather than statistical so I am trading carefully. It's an area I am interested in expanding into...

Personally I would argue it's still statistical. The back tests don't know when the reporting periods are, and the fact that they are still giving good results means the pair is statistically well-behaved even if the signals are generated from the earnings reports. In fact, the big wins in the back tests are usually the ones generated out of these signals.

That said, I'm not a pure statistical pair trader so I add my own filters that works for me, some technical, and some fundamentals.

 

[skc]

Personally I would argue it's still statistical. The back tests don't know when the reporting periods are, and the fact that they are still giving good results means the pair is statistically well-behaved even if the signals are generated from the earnings reports. In fact, the big wins in the back tests are usually the ones generated out of these signals.

That said, I'm not a pure statistical pair trader so I add my own filters that works for me, some technical, and some fundamentals.

Hmmm WOW/CCL does look quite good though - I was considering it this morning....CCL hasn't fallen...and you'd think any push on costs by WOW will be negative for CCL. Tough choice. This is almost a fundamental pairs trade rather than statistical so I am trading carefully. It's an area I am interested in expanding into...

WOW only reported 3 days ago?! If the pair backtest well through reporting, it's purely coincidental. The next report will be different. Overall, it's not a disciplined pair imho.

Let WOW settle on it's own. If you want to trade a bounce, trade the bounce... If you think CCL should be sold down on the back of the news, short CCL. Each of these trades will have different size and stop levels compared to a paired scenario.

The trade to take was short WES on WOW's report... that was a good low risk trade on open.

 

[VSntchr]

Closed mine at market close today, 1.5% for 3 days of hold, let it come again!

And it's back....3.87% on offer for full reversion at the close.

 

[VSntchr]

The trade to take was short WES on WOW's report... that was a good low risk trade on open.

Yeah that did appear to be a good trade. I was off managing some other trades and didn't even consider it. I did manage to ride SIP on API's upgrade though.

 

[skc]

And since M/A is hot these days, I think something worth watching for is IIN/TPM, I've never seen price of TPM trading above IIN, so now even 1:1 script offer now means a 14% premium.

I hope you are all over this

I exited my directional IIN position before ex-div 3 days ago...

The market was pulling back, and many ex-div stocks fell a lot more than the dividend itself. But I was prepared to re-establish a position this morning... why couldn't they make the annonucement mid-day?!

 

[VSntchr]

I hope you are all over this

I exited my directional IIN position before ex-div 3 days ago...

The market was pulling back, and many ex-div stocks fell a lot more than the dividend itself. But I was prepared to re-establish a position this morning... why couldn't they make the annonucement mid-day?!

And turns out your caution was unwarranted due to the JPmorgan upgrade deflecting any fall yesterday...damn! The landscape reduces by one. Now we have TPM, MTU, SGT and TLS.

 

[VSntchr]

Price at $8.65 now.
I see that as of last week it was about 5% of company shorted. Lot of covering/pain from them this morning..plus some speculation of a competing bid I suppose. The announcement mentions ACCC is fine with the deal so the chance of failure is very low.

 

[SilverRanger]

I hope you are all over this

I exited my directional IIN position before ex-div 3 days ago...

The market was pulling back, and many ex-div stocks fell a lot more than the dividend itself. But I was prepared to re-establish a position this morning... why couldn't they make the annonucement mid-day?!

I wish I was too, closed this very same pair 2 days ago for the same reason as you (and was looking to re-enter this morning too!) But looking at TPM was doing I probably didn't miss out a lot

I also noticed the unusual fall of stocks going ex-div, and shorted a few myself, MND, MRM and even IIN yesterday. I think it will still work for the next couple of days, but need to be selective.

 

[SilverRanger]

And it's back....3.87% on offer for full reversion at the close.

It's been ranging between 3% - 5% the last couple of days, quite a tough (but fun) ride!

 

[craft]

But looking at TPM was doing I probably didn't miss out a lot

So TPM pays 300M premium over the 1.1B IIN was valued at yesterday using debt and the market thinks - lets add another Billion of market cap to TPM. Seems the market just loves PE arbitrage at the moment.

 

[skc]

So TPM pays 300M premium over the 1.1B IIN was valued at yesterday using debt and the market thinks - lets add another Billion of market cap to TPM. Seems the market just loves PE arbitrage at the moment.

Yes... I am scratching my head a bit when TPM was up about as much as IIN. I guess there'd be plenty of synergies in the combined entity. A $1B @ 25x PE you'd only need $40m annual savings which really isn't a large number on a combined cost base of ~$1B.

Every other Telco is running on the back of this... so there's a rational market for you.

 

[VSntchr]

Have had a decent start back to pairs after the reporting season break...but a bit of a below the belt punch was felt this morning when I saw that ABP has gone into a halt due to a non-renounceable offer. Certainly throws a spanner in the works for my ABP pair. Lucky I have started back with a small size so the effect won't be significant to me.

This is the second A-REIT to raise funds, with SCP doing so also. That combined with the FDC/NVN merger shows that corporate activity is alive and well in this sector - this tells me to keep individual position sizes modest and dont go mavericking around!

 

[skc]

Have had a decent start back to pairs after the reporting season break...but a bit of a below the belt punch was felt this morning when I saw that ABP has gone into a halt due to a non-renounceable offer. Certainly throws a spanner in the works for my ABP pair. Lucky I have started back with a small size so the effect won't be significant to me.

This is the second A-REIT to raise funds, with SCP doing so also. That combined with the FDC/NVN merger shows that corporate activity is alive and well in this sector - this tells me to keep individual position sizes modest and dont go mavericking around!

I have ABP long as well but I found that rights issue don't isn't normally that damaging. You can potentially pre-short your entitlement if it open above the TERP and trade your way out of it. Or apply for additional entitlements if available (and price being favourable). The REITs aren't rocketing at the moment, so a 2 down days while ABP is halted might actually work in your favour as well.

So in summary... reason to stay nimble, but no reason to be too pessimistic.

But your observation about raising funds is quite interesting. With debt so cheap, you'd think they'd raise debt! May be it means there are opportunities for acquisitions (using high equity price to buy highly priced properties - a wash really), as alluded to by ABP's announcement. Certainly worth monitoring as they tend to do these things in a cohert.

 

[SilverRanger]

This is the second A-REIT to raise funds, with SCP doing so also. That combined with the FDC/NVN merger shows that corporate activity is alive and well in this sector - this tells me to keep individual position sizes modest and dont go mavericking around!

Third, GPT had one too (it was a SPP and their board came up with a super stingy scaleback strategy).

I have ABP long as well but I found that rights issue don't isn't normally that damaging. You can potentially pre-short your entitlement if it open above the TERP and trade your way out of it. Or apply for additional entitlements if available (and price being favourable). The REITs aren't rocketing at the moment, so a 2 down days while ABP is halted might actually work in your favour as well.

Great, looks like we are all in this

 

[SilverRanger]

Third, GPT had one too (it was a SPP and their board came up with a super stingy scaleback strategy).



Great, looks like we are all in this

How's everyone going today? ABP fell more than expected, I bought in some more at 2.86 hoping to recoup some losses, now considering ABP/anything at market close maybe.

On the bright side, closed all my FDC/NVN after a nice fall on NVN, don't think I will wait for the convergence this time.

 

[VSntchr]

How's everyone going today? ABP fell more than expected, I bought in some more at 2.86 hoping to recoup some losses, now considering ABP/anything at market close maybe.

On the bright side, closed all my FDC/NVN after a nice fall on NVN, don't think I will wait for the convergence this time.

Yes, ABP has fallen a bit more - and the offer doesnt really help a whole lot as its 1-12. Im still down on that trade but I have it with CHC which has co-operated so the loss is <1% currently.

Still got the merger arb on, but I will probably close today too...it's been at a loss for 12 days so seeing the profit is like seeing the first sunny day after a long cold winter :

I am doing quite well with my pairs so far..but as I said earlier...very small sizes while I rebuild my confidence. Additionally I have been executing some other trades which has had me very busy and unable to execute many pairs in the morning session.

 

[skc]

How's everyone going today? ABP fell more than expected, I bought in some more at 2.86 hoping to recoup some losses, now considering ABP/anything at market close maybe.

Nothing to really be too concerned. It fell a bit more today but probably the same as any other REIT over the last week or so.

On the bright side, closed all my FDC/NVN after a nice fall on NVN, don't think I will wait for the convergence this time.

Haha... I did the same thing. It blew out to >5% at one stage. I covered them in parts and made like $200

I am doing quite well with my pairs so far..but as I said earlier...very small sizes while I rebuild my confidence.

 

[VSntchr]

Yes, ABP has fallen a bit more - and the offer doesnt really help a whole lot as its 1-12. Im still down on that trade but I have it with CHC which has co-operated so the loss is <1% currently.

Well that changed quickly. Now >-5%

Haha... I did the same thing. It blew out to >5% at one stage. I covered them in parts and made like $200

Ended up closing the next day (yesterday) after you guys. It's blown out again! Purely looking at it from a optimistic perception would have you mouth watering with 5%+ again on offer...but the fact that this is trending lower and lower is concerning. I haven't heard anything that is jeopardising the deal - but I have certainly been out-of-sync with AREITS for a good few months now so treading cautiously here.

 

[skc]

Well that changed quickly. Now >-5%

I got out of my ABP/IOF trade earlier Friday morning with minimum damage... although I do have a pair shorting CHC and it seems to be on one of those runs which has the ASKs retreating at great speed.

Ended up closing the next day (yesterday) after you guys. It's blown out again! Purely looking at it from a optimistic perception would have you mouth watering with 5%+ again on offer...but the fact that this is trending lower and lower is concerning. I haven't heard anything that is jeopardising the deal - but I have certainly been out-of-sync with AREITS for a good few months now so treading cautiously here.
View attachment 62045

Nice chart. Thanks. It's almost working the other way... that the rise in NVN is holding FDC high. FDC is now outperforming the major REITs since my last update.



I have FDC short against another REIT, but in theory I may be should have shorted NVN (sort of gives you 2 trades in 1). I am of the opinion that no one is starting a takeover war for NVN at current prices. It is now trading at 37% above NTA and 5% yield. If you look at the usual suspects like GPT, MGR, SGP etc, their price/NTA are all lower (1.19, 1.21, 1.29), so any script based deal would be dilutive. Then again, someone was willing to pay $9 for TOL and several $B for a default toll road in Indiana. So you can never underestimate what silly aciton that cheap money can produce .

 

[SilverRanger]

I got out of my ABP/IOF trade earlier Friday morning with minimum damage... although I do have a pair shorting CHC and it seems to be on one of those runs which has the ASKs retreating at great speed.



Nice chart. Thanks. It's almost working the other way... that the rise in NVN is holding FDC high. FDC is now outperforming the major REITs since my last update.

View attachment 62068

I have FDC short against another REIT, but in theory I may be should have shorted NVN (sort of gives you 2 trades in 1). I am of the opinion that no one is starting a takeover war for NVN at current prices. It is now trading at 37% above NTA and 5% yield. If you look at the usual suspects like GPT, MGR, SGP etc, their price/NTA are all lower (1.19, 1.21, 1.29), so any script based deal would be dilutive. Then again, someone was willing to pay $9 for TOL and several $B for a default toll road in Indiana. So you can never underestimate what silly aciton that cheap money can produce .

I got in again yesterday and saw the pair revert more than 1% intra-day then back to peanuts. I'm sure this is not the first time this happens. Tomorrow I will consider closing half when I make 1% and leave the other half for a meaningful reversion.