Clearwire Stock Goes Up
What's the big deal?
by KathrynV 01:22PM Saturday Jun 16 2007
After Clearwire signed distribution agreements
with DirecTV and EchoStar to offer triple play services to all customers, the company’s stock jumped
up over 23%. Sounds great, but GigaOm points out
that the jump merely brings Clearwire back to where it was when the company first went public, noting that DirecTV stock barely increased and EchoStar’s didn’t go up at all.
| |gwionwild colonial boyPremium,ExMod 2001-08
Typical market behavior... ... as a rule, acquired companies sky-rocket, acquiring companies take a nominal hit, partnered companies (as in this case) go up, if they have little to lose and a lot to gain, and plunge if they have a lot to lose and poor chances of gaining...
What the market's saying, essentially, is that Clearwire's a "player", again, and might make some money, with this deal. Here's my play of the day... straddle (assuming you have option trading capabilities with your brokerage) Clearwire... buy calls and puts, in equal quantities, at the closest to current stock price available. Odds are, the stock will either drop or start slowly climbing, depending on the outcome of this partnering. Remember, options are a risky play, and require constant monitoring and quick trading, when the play comes in, one way or another. They're fungible, and lose time value, even deep in the money, as they approach expiration. A straddle (just my own humble opinion) on a rather volatile stock is a beautiful thing... stock goes up, you make money... stock goes down, uhm... you make money. You only lose if the stock hovers around the strike price you bought into. Therein lies the paradox... you can, in real fact, lose the whole investment, if the underlying stock doesn't move over the course of the option ... hence, my own habit of buying long-out options, which cost a bit more, but offer me some breathing room, and increase the odds of a major swing, either way, before expiration...
Caveat... I've lost tons of money, short term, trading options. I've made some, too, long term, though. It requires determination and a bit of chutzpah, to do it successfully. So, Clearwire lost me a thousand bucks... I've got two thousand on my Verizon play... get it?
(mandatory disclaimer: I trade in oil/energy related options, myself... I can rather effectively tell you when to get in and out of Halliburton or Exxon, but I'm really clueless in tech. Like Warren Buffet, I trade in things I understand, and I understand oil and energy, I understand networking, too, but I don't understand the business of network hardware (I almost lost my shirt, in 2000, from simple arrogance and trying to call the "winners" in a losing game)... so I avoid trading in it like plague. The name of the game's risk arbitrage. If you understand Clearwire's business and strategy, go for it... if not, buy a straddle on something you do understand. I have no idea of the volatility of Clearwire, and, forgive me, I just logged off from my trading apps... and it's Saturday, and I'm off the clock ... I'm not going to analyze it, just now. Just tossing an idea out, for consideration...
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And all dishevelled wandering stars.