A Real "bet" On Stocks

[teej]

I’ve a friend in town visiting. Right now he and his girl are staying in my house because he got the crap kicked out of him (not his fault) on one of Amazing Thailand’s islands.

I’ve a busted knee so both of us sit around playing Nintendo and make stupid bets. He and I have been making dumb wagers since we were market-makers together.

Now just 2 weeks ago we were in Macau. I was there just for one night, but I got myself into this:

The Drunken Wager:

We're standing in front of the Crown Macau, and to make a long story short, we ended up making a wager of 100grand against his parking spot in Hong Kong that I couldn’t make more money in a casino stock than in a casino. Idiotic, yes.

Now he’s staying at my house and I brought up the bet today:

Me: You serious about the Macau bet?

Him: dam_n right I am. You?

Me: Terms.

Him: Like I said, you buy 100 grand of stock, if you win you win if you lose you lose.

Me: You're an idiot, that's just stupid.

Him: Then take the bet.

Me: I will. But we have to have real terms.

Him: Fine. You gotta buy stock before the start of the Regular Olympics and sell within a week after the Retarted ones end (god bless his un-PC-ness).

Me: That's brutal, no way, you can't screw me over by making me buy before the Olympics and sell after it. Nobody would do that.

Him: Fine, what do you want then?

Me: If I gotta buy before the Olympics, I need time in case we crash.

Him: No way.

Me: It's only fair.

Him: Ok, but then you gotta bet more. 200 grand and you get one year.

Me: Against your spot?

Him: Yeah. And you have to sell in the last week of October 2009(I knew it, he's a freak about October).

Me: My downside is huge then, plus your stupid rules about when i can buy/sell. You've got nothing to lose. My new Deal is Parking spot + your car if you're gonna put restrictions on the weeks I can buy and sell.

Him: No way.

Me: Ok, fine. Parking spot + we trade cars if I win, then.

Him: (thinks) You're on b_tch.

We just did some research and it seems The Crown is owned by a company listed on the Hang Seng, and the stock looks like a dog but what the hel_l do I know about stocks, anyway. Irrelevant, because it’s the terms of the bet that I want some input on. He thinks I’m a jackass for getting on TV and asking this but I like some of you guys and I need some input before I get hosed.

My Analysis:

1. I figure my downside is 100 grand (actually 200 grand, but I'd say a safe downside is to cut the stock in half but then again it could go to zero).

2. My upside is the spot (~100 grand) + trading cars (which are really a wash, but I don't mind a change, plus his is a convertible).

3. And the kicker is that my upside could also include any increase in the stock, if I win.

4. But he gets the huge advantage by making me buy and sell in specific timeframes and using those prices only.

5. Also, I could be sneaky and buy warrants on the stock (if they offer them) to cover some downside.

The way I see it, he has no upside (except bragging rights), and his downside is his parking spot worth about 100grand, I’d say more. It seems like a good bet to me.

I have until the start of the Olympics to seal the deal. This is the largest bet we've ever made with each other by far, but it seems fair -- and would be an awesome story if I won. Probably still a good story if I lost too. .

Am I missing something in thinking the terms seem fair? Yes I know we are totally childish. No need to comment on that. And yes we both give to charity.

[lannarebirth]

I wouldn't take the bet under those conditions. You have what appears to be an uncompleted correction that you have to buy into and bad seasonality to sell into. That's a lot to overcome.

[LaoPo]

Maybe I'm missing something but are you talking of investing in Crown, the gaming company ? Or are you talking investing stocks in general ?

If it would be in -just- Crown....or any other gambling venture....don't do it.

""The recent and ongoing events in world credit markets have made it very difficult for gaming operators to develop commercially viable casino-entertainment projects where those projects require significant external debt funding,""

from: http://www.news.com.au/business/story/0,27...3-14334,00.html

http://search.news.com.au/search//0/?us=nd...Rowen%20Craigie

If it's investing in just Crown and/or in other Macao casino stocks be very careful. Macao is literally floating on income from Chinese gamblers and ALL signs I hear from within China are worrying; that means that trips from gamblers will drop substantially and thus the income (and shares) from casinos in the year(s) to come.

Most reports are still positive about (past) inbound tourism (gamblers) to Macau but the future doesn't look too bright.

You better watch out.

Better read this too and Google as well for Stanley Ho:

http://www.bloomberg.com/apps/news?pid=new...id=azbs8PMjp3oU

LaoPo

[Gary A]

Yes, sounds to me like a drunken bet. Maybe 100,000 kip or something like that. Even better, 100,000 Zimbabwe dollars that you can pay with pocket change.

[teej]

Thanks lanna, I was hoping you'd chime in. Also LaoPo.

It's just a bet. Between friends. But the stakes are high(er). My mate has more money than I do probably by 3x I'd guess. He kept working after we left the trading floor together.

I don't trade stocks. I only trade options/warrants (the only thing I was ever 'good at' financially). And even with the options, I haven't traded in quite some time except brutal volatility spread that took me from behind in March. This is part of the reason why I was asking about International Brokers, just wanted some info.

But this wager got into my head and I really do want that parking spot of his. Maybe non-Hongkoners don't appreciate the value of a good parking spot, but it's considered real estate in HK, and yes they run around 100K USD for good ones.

Lanna and LaoPo thanks for the input, as I was kind of taking on the bet just for fcuks sake, as I'm not an equity guy. So I figured lanna at least would have a fancy chart for me to ponder which he provided as I had expected from him...

Gary, you think I'm lying. I can accept that. Here is a rundown of my confirmation emails that I received when 'testing' out my broker/dealer in the morning. I wanted to see how fast orders were placed, etc. I put in the order 10 spreads away and canceled it as we got about 2 spread away. Incidentally, after I canceled my order (300K is a big order, the stock usually trades in little 10k-15k lots) the bids disappeared and the stock dropped 10 cents. This is in a pretty illiquid stock.

Interestingly, looking at the offers, they were ALL Deutsche broker/dealers, and I mean ALL, from the market offer to multiple spreads back. The bids were from little crappy chinese security houses. The only reason I kept the order for so long was because Deutsche had an offer for 700K shares and I didn't believe it, so I wanted to shake them out (this idea stems from when I was trading options, sometimes I'd trade Globex and the e-minis were new then, you had a lot of people putting in huge orders a spread away to try to move the market - at that time trading was so small that many times I knew who was doing it, and often it was a guy in my office that was doing the e-mini/futures pit arbitrage, in size - as in 200up in S&P Futures). Yeah, who am I to go up against Deutsche but I'm a rogue I suppose and I did it for kicks. Call me stupid or childish fine, but I'm not a liar.

These were my confirmations:

A/C :XXX-XXXXXX-X

Order No : xxxxxxx

Date : 30 Jul 2008 02:00:03 GMT (HK Time : 30/07/2008 10:00:03)

XXX Securities Company Limited acknowledges receipt of your order (Order No: xxxxxxx)

to BUY 300,000 shares of MELCO INT'L DEV (Stock: 00200) at Price HKD5.010

When your order has been placed in the market, we will provide you with further e-mail

confirmation/messages in the MESSAGE BOX under your securities account.

A/C :XXX-XXXXXX-X

Order No : xxxxxxx

Date : 30 Jul 2008 02:02:32 GMT (HK Time : 30/07/2008 10:02:32)

XXX Securities Company Limited confirmed that your order (Order No: xxxxxxx) to

BUY 300,000 shares of MELCO INT'L DEV (Stock : 00200) at Price HKD5.010 has been input into the AMS system of Stock Exchange of Hong Kong and requires queuing.

Gross Amount :

HKD 1,503,000.00

Stamp Duty :

HKD 1,503.00

Transaction Levy :

HKD 60.12

Investor Compensation Levy :

HKD 0.00

Brokerage Fee :

HKD 3,757.50

Trading Fee :

HKD 75.15

CCASS Stock Settlement Fee :

HKD 30.06

Net Amount :

HKD 1,508,425.83

We will provide you with further confirmation by e-mail of the full or partial execution

of the order in due course.

A/C :XXX-XXXXXX-X

Order No : xxxxxxx

Date : 30 Jul 2008 02:41:49 GMT (HK Time : 30/07/2008 10:41:49)

Your Order (Order No: xxxxxxx) to BUY 300,000 shares of MELCO INT'L DEV (Stock : 00200) at Price HKD5.010

[is Confirmed Cancelled]

So unless you think I sat here for a half-hour and made up of these orders and numbers out of some elaborate "ruse" to impress all of the so many hot chicks that read the Jobs Forum, you'll see that 1.5million HKD is around 200grand USD, give or take "pocket change." And I think Naam mentioned in another thread that only crazy people would put in orders over 100K USD over the internet, but I did, and in one block. Call me crazy, call me stupid, call me childish, but don't call me a liar. Granted, I did cancel the order. But I wasn't planning on executing it just yet anyway, my friend and I were just checking out my banks trading system (and it's crap - 2 mins from receipt of order to order placement?!)

But to lanna and LaoPo, thanks for the advice. I think I may have to pass on the bet given your advice - which is the reason I asked you guys because I know eff-all about equities, especially casino stocks. If I do make the trade, I'll be sure to update my idiocy.

edit: To LaoPo, I was referring to the Crown only because my friend pulled it out of his ass, we didn't actually know if it traded or who owned it, etc. But we looked it up and it seemed that a company Melco (0200.HK) was the owner, so we just went with that stock, really for no particular reason save the fact that we were standing in front of the Crown when we came up with this moronic wager.

Edited July 30, 2008 by teej

[lannarebirth]

Don't infer that I now anything at all about stocks, I don't. On the rare occasions I trade them I usually don't even know what the business of the company whose symbol I'm trading is.

That Hang Seng is something else. I tried trading the futures on it, and as much as I love volatility it was just too much. Wow! that thing really moves.

[teej]

Yeah lanna, the Hang Seng is a floor-trader's wet dream. Its 2,3,4,5% moves are normal! Truly an amazing market, true to the values of Hong Kong itself, where fortunes and empires can be made and lost, all right before your eyes...

Don't be humble lanna, I think you're pretty good at your charts, and I like them. I don't know what they mean or how to interpret them, but I still like them. Pictures... mmm....

Also, why do you stay up so late, if I may? I don't know many older gents who are up as late as you are... hey myself I'm a night-owl too, but do you get up early too or sleep in? Are you trading foreign markets, is that why you're up late? Myself, I like the night because it's quiet. That said, I'm gonna go stalk someone now....

edit: about the Hang Seng's volatility... I learned a hard lesson on a volatility spread this past March. I had been holding cash for so long (since December 07) that I just had to do something. And I got butt-raped, to put it nicely. I attribute it to "an aberration in Time Decay." I still don't really know what happened to my position except that, well, it butt-raped me.

Edited July 30, 2008 by teej

[lannarebirth]

I've got 2 trades on in US futures market. I really do hate the hours though. I get up at normal time and sleep late on weekends.

I tried the Hang Seng as I mentioned and the Sydney Futures Exchange so I could work daylight hours. Australia so sleepy I actually moved the market, which scared the shit out of me. I may take a look at the TOPIX but if I don't switch to Asia I'll be done with all this by next year I think.

[teej]

OK I see, thanks for answering. Well I'm off to bed now, good luck w/yr US futures lanna.

TOPIX... hmm....something i never considered... but then I figure it would be another market I don't know and would probably set myself up for a nice beating.

[LaoPo]

....I learned a hard lesson on a volatility spread this past March. I had been holding cash for so long (since December 07) that I just had to do something. And I got butt-raped, to put it nicely. I attribute it to "an aberration in Time Decay." I still don't really know what happened to my position except that, well, it butt-raped me.

It's hard for a lot of people to sit on cash and they lose their patience.

Patience is the answer...I'm still patient since it's still bad weather outside, very bad....

If I see companies like GARMIN - GRMN (navigation devices for cars) drop -22% today and -63% since Jan it's bad weather.

If I see worldwide financials drop like hailstones it's still bad weather....

If I see that home sales (and mortgages) are down in the US, UK and Spain (-35% in May) it's still bad weather.

Be patient....

LaoPo

[lannarebirth]

....I learned a hard lesson on a volatility spread this past March. I had been holding cash for so long (since December 07) that I just had to do something. And I got butt-raped, to put it nicely. I attribute it to "an aberration in Time Decay." I still don't really know what happened to my position except that, well, it butt-raped me.

My condolences. That happened to me (something similar) once, several years ago. It's like a month long kick in the nuts. Of course everything moved where it should have gone once I got out.