ASX Stock Pairs Trade Journal

[skc]

SKC - you mentioned trading TPG short and long, are you trading based on discretionary price/vol type signals..or are you using your knowledge of the stocks, the situation and your perception of any over/under reactions?

I shorted TPM near its open. TPM jumped a lot when it announced the first offer to buy IIN, which means the market perceived that TPM is getting a great deal. If TPM counters, it will cost more. If TPM doesn't counter, it loses all that growth. So it's a no brainer short.

The long later on was a result of watching the IIN/MTU deal converging quickly. It reads to me that the market may think that deal has a chance and TPM may not trumpt the offer. So the shorts on TPM in the morning need to cover... so I went long.

That was just my interpretation of the price actions. It could be as accurate as the flat earth theory... the theory fits the observations but is completely wrong!

 

[SilverRanger]

I shorted TPM near its open. TPM jumped a lot when it announced the first offer to buy IIN, which means the market perceived that TPM is getting a great deal. If TPM counters, it will cost more. If TPM doesn't counter, it loses all that growth. So it's a no brainer short.

The long later on was a result of watching the IIN/MTU deal converging quickly. It reads to me that the market may think that deal has a chance and TPM may not trumpt the offer. So the shorts on TPM in the morning need to cover... so I went long.

That was just my interpretation of the price actions. It could be as accurate as the flat earth theory... the theory fits the observations but is completely wrong!

Just reading through the schemes of arrangement in Australia, TPG actually needs 25% to form a blocking stake (as opposed to just 10% in a takeover bid). That means they can either walkaway or raise the takeover price, but not build a blocking stake just to screw up MTU. That's really a 50/50 to me, so I don't think I'm in for this merger arbitrage

 

[skc]

Just reading through the schemes of arrangement in Australia, TPG actually needs 25% to form a blocking stake (as opposed to just 10% in a takeover bid). That means they can either walkaway or raise the takeover price, but not build a blocking stake just to screw up MTU. That's really a 50/50 to me, so I don't think I'm in for this merger arbitrage

I have already closed my IIN/MTU pair, with IIN trading some 7.5% premium at one stage today.

I now have a half sized IIN/TPM pair. It's not much of a merger arbitrage... just a punt that the current offer for IIN is not the last. It's been a long while since a good takeover battle. Considering where MTU and TPM trades at, a higher valuation for IIN is still possible.

I think there's also a clause that, upon the IIN Board declaring that the competing offer is superior, TPM can go to market and buy up IIN shares. TPM currently can't buy IIN on market as part of the first deal (which crazily is still the "recommended" deal). However, I don't know if TPM can buy enough on market. They'd need some big insto holder to do them a favour via block trade.......

 

[Atari rose]

Cloesed Honda/Ford trade went quicker than expected and better.

+500.00 on Honda.

 

[VSntchr]

Took a hit on TPG ruining the AMM/VOC trade. Lost ~8% there, so while it sucks and has ruined my month..it's not so bad..and the profits from the other mergers I have been trading are largely covering this.

TPG doesn't have many customers as fans, now it's lost a few investor fans too!

 

[skc]

Took a hit on TPG ruining the AMM/VOC trade. Lost ~8% there, so while it sucks and has ruined my month..it's not so bad..and the profits from the other mergers I have been trading are largely covering this.

TPG doesn't have many customers as fans, now it's lost a few investor fans too!

Bad luck Mate. By pure chance I am not on this whilst it happened.

This is a very tricky sector to pairs now so best to just stand aside unless you have some pretty firm insight into the chess game that's playing out.

 

[VSntchr]

Bad luck Mate. By pure chance I am not on this whilst it happened.

This is a very tricky sector to pairs now so best to just stand aside unless you have some pretty firm insight into the chess game that's playing out.

Yep. Telco is a stand and watch for me at the moment. Closed my SPK/TLS for 2.2% so that helps a bit and also clears me from the sector.

 

[McLovin]

This is a very tricky sector to pairs now

Understatement...

What's TPG playing at? Feels like they're showing MTU just how much bigger and more cashed up they are..."we can sit on a blocking stake in AMM and IIN if we feel like it and you can't"

This could turn into an old skool takeover battle.

 

[skyQuake]

Understatement...

What's TPG playing at? Feels like they're showing MTU just how much bigger and more cashed up they are..."we can sit on a blocking stake in AMM and IIN if we feel like it and you can't"

This could turn into an old skool takeover battle.

MTU just woke up with a severed horse's head

 

[VSntchr]

Bit of reversal in the overall market this week has presented quite a few quick trades for me (alot of money left on the table too!!). I am pretty cautious about the next major theme that will emerge over the next few days/weeks so still keeping position sizes in check and ensuring that fundamental correlations are tight (e.g. no matching USD earnings with domestic earnings etc).

Our favourite merger arb is back in all its glory with over 3.5% on offer again.
Below I have placed an hourly chart of the profit potential to full reversion. The two boxes show areas where I have been entering and exiting portions, while retaining a 'retainer' for full reversion. The hourly parameter excludes some favourable spikes so being quick can allow for better entries and exits on any given day than the chart suggests, I just couldn't be bothered collating any more data points!

 

[skc]

Our favourite merger arb is back in all its glory with over 3.5% on offer again.
Below I have placed an hourly chart of the profit potential to full reversion. The two boxes show areas where I have been entering and exiting portions, while retaining a 'retainer' for full reversion. The hourly parameter excludes some favourable spikes so being quick can allow for better entries and exits on any given day than the chart suggests, I just couldn't be bothered collating any more data points!

There's only 1 month to go. The market is acting like it's lost its calculator on this merger ratio... or a last moment counter offer is set to emerge like the AMM/VOC deal.

Bit of reversal in the overall market this week has presented quite a few quick trades for me (alot of money left on the table too!!). I am pretty cautious about the next major theme that will emerge over the next few days/weeks so still keeping position sizes in check and ensuring that fundamental correlations are tight (e.g. no matching USD earnings with domestic earnings etc).

Very wise. Time to be a bit cautious. You don't want to go heavyhand shorting volatility when volatility is rising. Let the correlation blow out a bit more before putting on a trade imo.

 

[VSntchr]

You don't want to go heavyhand shorting volatility when volatility is rising. Let the correlation blow out a bit more before putting on a trade imo.

These bloody Macqaurie conferences are tiring me out. I like to find out more about companies I pair trade, but so many at once is :bonk:

 

[skc]

These bloody Macqaurie conferences are tiring me out. I like to find out more about companies I pair trade, but so many at once is :bonk:

Yes... and some companies hide little outlook and update slide in there somewhere so you have to read them.

Traded JBH beautifully on the presentation release marked non-sensitive.

 

[SilverRanger]

Yes... and some companies hide little outlook and update slide in there somewhere so you have to read them.

Traded JBH beautifully on the presentation release marked non-sensitive.

I had JBH on with DSH as a pair trade as well, not bad for just 1 day of holding time. Today flipped to short it with SUL.

Looking at today's standout, QAN went up 7% following an investor presentation release. Looking at the headlines I can't see anything specific to QAN that won't flow through to VAH. Am I missing something?

 

[skc]

I had JBH on with DSH as a pair trade as well, not bad for just 1 day of holding time. Today flipped to short it with SUL.

Looking at today's standout, QAN went up 7% following an investor presentation release. Looking at the headlines I can't see anything specific to QAN that won't flow through to VAH. Am I missing something?

I don't do VAH/QAN pair anymore. VAH is majority owned by 3 other airlines and it's not a company that necessarily act in the best interest of all shareholders. QAN annoucned the possible return to dividend so that gave it a boost. VAH is still a long way off.

 

[VSntchr]

I have been busy scaling out of FDC/NVN all week in the hopes of it diverging again, but not to be. It seems that midnight is approaching and convergence has arrived . As of the close I am completely out.
I feel after 3 months and 5 successful in/outs that this merger has been milked out.

Just did the sums and over those 5 trades I managed to reclaim 95% of the loss on the AMM/VOC breakdown.
Speaking of AMM/VOC - I would have reclaimed a large chunk of that loss by holding on and riding the hopes of the t/o getting through scheme arrangement as their is still a slim hope which has slimmed the premium somewhat, but I am trying to hard-wire strict discipline into my trading. Price-sensitive news for a pairs trade = get out, and in this instance, merger altering news = get out. In the short run this might cost me a few % points - but it will certainly save me having to endure sleepless nights and frantic weekends sitting and hoping for things to go my way.
The longer I trade, the more I am starting to see that there is at least a decent correlation between making decisions which are good for the psyche and overall performance.

 

[VSntchr]

This week started quite slow for me, with somewhat of an empty portfolio. However, it certainly revved up yesterday in the afternoon session and into today. Now I am quite busy

I actually have a nice spread of sectors open at the moment too, with trades in transport infrastructure, healthcare, retail, REITs, and financials. Diversifying away from being so heavily reliant on the REIT sector has been a goal of mine, so this is pleasing.

Oh and managed to get in for another trade on FDC/NVN , target getting thinner now but aiming to scrape out 1.9% before this time next week when it goes to vote. Already 40% towards the target so looking good!

 

[skc]

This week started quite slow for me, with somewhat of an empty portfolio. However, it certainly revved up yesterday in the afternoon session and into today. Now I am quite busy

I actually have a nice spread of sectors open at the moment too, with trades in transport infrastructure, healthcare, retail, REITs, and financials. Diversifying away from being so heavily reliant on the REIT sector has been a goal of mine, so this is pleasing.

Oh and managed to get in for another trade on FDC/NVN , target getting thinner now but aiming to scrape out 1.9% before this time next week when it goes to vote. Already 40% towards the target so looking good!

Very nice.. I am maxed out on pairs at the moment with a skew towards long $US earners. Today was a step in the right direction.

 

[VSntchr]

Very nice.. I am maxed out on pairs at the moment with a skew towards long $US earners. Today was a step in the right direction.

Also very nice.

Are you referring to a limit for max no. of pairs open, or $ exposure?

 

[skc]

Also very nice.

Are you referring to a limit for max no. of pairs open, or $ exposure?

Number of pairs... once it gets above 15 you get a smooth equity curve, offset by the fact that you can't optimise every trade anymore.

P.S. Just saw CHC equity raising. Why can't they do rights issue these days? These REITs are certainly raising as a cohort.