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Tony
I also said that "the purpose of my posting is to try and clarify to who's interested exactly how the hedging process works"
I am not and never was an accountant so the fact your spreadsheet mirrors the accounts and you then share that with this board is very useful and informative.
I was a Derivatives broker so my expertise is in the trading and hedging part of the process and hopefully I have managed to explain how this works.
Tony
If you enter into an exchange traded product and your hedges go offside then you will receive a margin call from said exchange so will have to pay this as the product is marked to market daily so in accountancy terms you are making a loss.
However using the previous example we could sell futures at $70 and the EDSP is $80 so technically we have lost $10 on the hedge but because the EDSP is $10 higher then the hedge has done what it was put on to do which was to sell the oil at $70. I appreciate that many PI's don't understand how hedging works however I have been involved in derivatives for around 25 years so I do know what I am talking about.
Thirdly you suggest that selling oil at $70 when spot is $80 is considered a loss and at this point you need to question whether we do need to put on hedges at all or just sell into the market at spot and suffer the volatility as a consequence, I know there are arguments for both positions but personally I would like to see around 50% hedged for some certainty but that's just me thinking and I'm sure others would argue differently.
You also say that the NOI is based on the spot and not the hedged price however that is an issue for the i3 accounts department to clarify, the purpose of my posting is to try and clarify to who's interested exactly how the hedging process works
To put it simply you correctly say that the profit or loss on the hedge is irrelevant. This is because i3 is an oil producer so all we do is suck it out the ground and sell it to market, the hedge only dictates the price that it is sold at.
If we put on a $70 hedge and oil goes to $80 then the hedge being marked to market will show a $10 loss however all that's happened is that we have sold the oil for $70 and missed out on selling it at $80 hence a technical loss on the hedge that doesn't actually exist because we have agreed to sell at $70.
All derivatives have an expiration date and as MA has sold put options the result is that if the stock price is below the strike price on expiry date the he has to purchase the stock at the strike price, if the sock is above the strike price then the options expire worthless.
Some chart patterns, for example Head and Shoulders or 3 White Soldiers, can be considered Bullish or Bearish and the more obvious they are the more chartists and Algo's notice the signal and trade accordingly making the patterns self fulfilling.
Very basically any fundamental change in the share price because of a positive or negative RNS is reflected on the chart and people will look to previous chart points for support/resistance levels.
Paul you are doing the correct thing by using the skills you do have to make money, there are so many people that use skills they don't have to lose money !
Personally I can do both, I ran KOD from 0.39 to 0.89 long term, although was offside for a while, and did a bit of intra-day CFD jobbing on the long side but it's been a fantastic stock to trade with the recent daily ranges however my achilles heel is shorting stocks, it just doesn't sit well with with me so I'd rather buy some longer dated puts on the indicies and even then I usually close out too early.
Longer term I think the fundamentals here are superb but from a trading point of view I think we might have another upside push before we get a bit of a retracement whilst we wait for some further news, obviously AIMO and not a recommendation but please feel free to remind me if I'm wrong.
Lav, firstly thanks for all your informative posts on KOD over time and yes one man's stop loss is another mans liquidity. MM's don't have to hold shares just make a market price in a specific size, I have seen a lot of short squeezes from MM's trying to scramble to buy stock to cover their positions when caught out so it's not all one way traffic.
Paul it appears that you are someone who trades the market as a genuine investor, by that I mean you do your fundamental research and invest accordingly so whether the MM's widen their spread or play their games it makes no difference to your long term view. Where it matters is to the short term traders who use technicals or momentum on a leveraged basis and are looking at making just a couple of ticks , dropping the bid can force these traders to stop themselves out and look for the next trade hence I say they can pick up some cheapies just by playing with the spread.
I'm not invested here but have been previously, I find it strange that the management have not issued an RNS saying they have no knowledge into the share price movement. Personally I wouldn't consider investing again until this point is clarified