Interesting Trade

Doug Kass over at RealMoneySilver.com is shorting Berkshire Hathaway B, which is being added to the Russell 1000. The stock has rallied nearly 15% recently partially due to the addition. The stock flew when it was added to the S&P 500, so many traders are probably queued up for the trade. The difference is that a lot less money is tied to the Russell 1000. I am entertaining shorting Berkshire Hathaway B for a trade.

9 comments:

Onlooker said...

Tsachy

Do you know if the ISE (and the CBOE also, for that matter), filters out the data on puts/calls on the inverse relationship ETFs? In other words, it’s easy to see how calls on bearish ETFs could really skew the data and reduce its usefulness.

I assume that this has been thought about and taken into account, but I couldn't find anything on the ISE website that addressed it at all.

The thing that really brought it to my mind was seeing the SDS on the list of top bullish (i.e. more calls than puts) on the ISE sentiment website page this morning ( http://www.ise.com/WebForm/viewPage.aspx?categoryId=126 ). That caused this concern of mine to come to mind again.

Have you looked into this? Am I off base somehow in my thinking?

Thanks

Tsachy Mishal said...

The equity only which is what I look at mainly does not include ETFs.

Onlooker said...

Yeah, I understand, and that would be a good reason for doing so, for sure, if they haven't filtered this out.

Still a question that begs to be answered when looking at $CPC data or the ISE all securities data.

I'm going to query the folks at SentimentTrader.com about it. I'll let you know what I find out.

Anonymous said...

Shorted Brkb at the close, but the 15% number is inaccurate. Brkb has outperformed the SPY by about 7% over the past 6 weeks and trading volume today was about 16x normal! A rollback of at least 3% should be a slam dunk.

Praguer

Tsachy Mishal said...

Seems like a good trade.

Tsachy Mishal said...

I seem to recall it traded at $70 during the latest downturn. $80.50 is a 15% rise.

Anonymous said...

My error. You're correct. The SPY is up only around 3% during that time. Unfortunatley, Brkb rose an additional dollar during the last 15 seconds of trading! I suspect that will unwind quickly.

Praguer

Tsachy Mishal said...

The Russell rebalance had a larger effect than I thought it would. Look what happened at the end of the day to large cap stocks that were sold to make room for the new entrants (mainly BRKB) WMT, AMGN, MSFT, IBM.

Anonymous said...

Russell additions and deletions in the samll cap space was in some cases huge. AXN went up 17.5% on Friday, well over 30% in the preceeding 2 weeks and has doubled since April. AOB, which was removed, fell regularly despite owning 32% of AXN, a holding now worth equal to roughly 30% of AOB's market value.

Prguer