Speculating on mergers · Michael Samuels (stock trader)

Published on May 1, 2020

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EP 165: Speculating on mergers—and a case of “excessive” due diligence w/ Michael Samuels

I was introduced to my guest of this episode by an experienced trader and fund manager, who described him as being, “hands down the best trader I know…”

Michael Samuels is an equities trader, who once traded for First New York and Apex Capital, he now manages his own money under the banner of Broome Street Capital.

Michael describes himself as being an ‘event driven trader’ with a primary focus on news flow surrounding mergers and acquisitions, shareholder activism and fundamentals—to seek out valuation disconnects.

During this episode you’ll hear about merger-arb strategies (including examples), what happens during takeovers, a case of “excessive” due diligence, mistakes made and lessons learned during Michael’s career, plus plenty more.

You should also note, Michael’s recently begun hosting a podcast about M&A activity and the journalists who report on significant company news: According To Sources

Speculating on mergers · Michael Samuels (stock trader), Event Driven Trading

Event Driven Trading, Speculating on mergers · Michael Samuels (stock trader).

Spike Failures

Spike “failures” are just as typical, otherwise more, than spikes that continue themselves. The thinking behind is rather simple: high frequency formulas are trading straight off the first data launch. As the data gets digested, reversal or extension is determined as investors devote.

There’s not way too much to mention below from a technological viewpoint apart from the truth of seeing what occurs circa the first pullback in cost.

Volatility Is Not a Plaything

Prior to we obtain as well much, I’m really going to stop. Why? Due to the fact that I know this principle can be secured of context. I wish to ensure I repeat the bottom lines below:

  1. True spikes that continue are uncommon. If you’re trying to trade in the direction of a spike, please describe this write-up in terms of catching major pullback retracement factors, but use severe caution as well as make certain to meticulously asses the situation well ahead of trading time. Just be prepared as well as use common sense.
  2. Spike turnarounds are just as typical, otherwise more, than spike continuations.
  3. When doubtful, stay out. Measuring a sharp relocate cost is something, but it is just one part of the equation.

Indeed, among my subconscious goals for today was to simply elevate recognition regarding exactly how ill-conceived prevalent strategies surrounding spike trading can be. Spike trading is possibly the riskiest as well as most difficult of all kinds of trading, yet for one reason or another a concept exists that makes it feels like a simple procedure.

Even more ahead on this topic … still beginning around these parts. Thanks for dropping in as well as see you quickly.

What is a base as well as quote money?

A base money is the initial money listed in a foreign exchange set, while the second money is called the quote money. Foreign exchange trading constantly entails marketing one money in order to acquire one more, which is why it is priced estimate in sets the cost of a foreign exchange set is how much one system of the base money is worth in the quote money.

Each money in both is listed as a three-letter code, which has a tendency to be formed of two letters that stand for the region, as well as one standing for the money itself. For example, GBP/USD is a money set that entails getting the Wonderful British pound as well as marketing the United States buck.

So in the example below, GBP is the base money as well as USD is the quote money. If GBP/USD is trading at 1.35361, then one pound is worth 1.35361 dollars.

If the pound rises against the buck, then a solitary pound will certainly be worth a lot more dollars as well as both’s cost will certainly raise. If it drops, both’s cost will certainly lower. So if you believe that the base money in a pair is most likely to strengthen versus the quote money, you can acquire both (going long). If you believe it will certainly deteriorate, you can market both (going short).

To maintain points purchased, most service providers split sets right into the following categories:

Major sets:

7 money that compose 80% of worldwide forex trading. Includes EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD as well as AUD/USD

Minor sets:

Less frequently traded, these often include major money versus each other instead of the United States buck. Includes: EUR/GBP, EUR/CHF, GBP/JPY

Exotics:

A major money versus one from a tiny or emerging economic situation. Includes: USD/PLN (United States buck vs Polish zloty), GBP/MXN (Sterling vs Mexican peso), EUR/CZK

Regional Pairs:

Sets identified by region such as Scandinavia or Australasia. Includes: EUR/NOK (Euro vs Norwegian krona), AUD/NZD (Australian buck vs New Zealand buck), AUD/SGD

Conclusion:

It might appear as well apparent to point out, but an organized chart is simpler to trade, particularly when you understand the communication between deep predisposition as well as risk view as well as exactly how it is playing out on the chart. A disorderly chart shows perplexed thinking about what is basic deep predisposition as well as what is risk view. Bottom line, if you can’t read the chart as well as visualize what the huge gamers should be thinking, you should not attempt to trade it, also when the most sophisticated of indications are offering you the consent. Clear thinking causes rewarding professions.

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