RE: Oil up 3.2%29 Aug 2022 19:59
As I see it Bank of America have taken up a position with 8% of the equity (again) and inviting the lovely shorters to try and do their thing (again); remember the plunge to 298p assisted by the EIG redistribution and director sales? I can’t see a drop of 25% again but you never know with HBR!
As it turned out, those of us that were able to buy fairly close to the bottom, and could see through this unrealistic movement, have benefited hugely.
The positions start getting significant in October when 1.7m shares will be returned to BOA, but it gets really bad in January with over 17m shares so they obviously are thinking that the shorters will bet on the price being significantly lower than today's price between now and January 2023. Gives them a fair old window to try and batter the price. Prepare for big illogical dumps and long periods of the machines selling. It continues throughout 2023 per the schedule in the RNS.
The fact that it doesn't get really bad until Jan is a good thing because we know that HBR will be Net debt free by then and ok the Natural Gas price may have dropped by then from today's 640p per therm, but this business is all about making hay whilst you can. I expect the usual volatility during the day but I can't see there being a serious run on the SP like before because the accounts speak for themselves and Q3 and Q4 are going to be massive for HBR. I am staying in for now because I believe the SP has a way to go and should sit comfortably above 600 in the near future. I think and hope the shorters have their work cut out in the medium term, but I might hold some back in case they do get the SP falling.
About SWAPS:
'Investment banks that offer this product usually take a riskless position by hedging the client's position with the underlying asset. For example, the client may trade a swap – say HBR. The bank credits the client with 1,000,000 HBR at GBP 4.921. The bank pays the return on this investment to the client, but also buys the stock in the same quantity for its own trading book (1,000,000 HBR at GBP 4.921). Any equity-leg return paid to or due from the client is offset against realised profit or loss on its own investment in the underlying asset. The bank makes its money through commissions, interest spreads and dividend rake-off (paying the client less of the dividend than it receives itself). It may also use the hedge position stock (1,000,000 HBR in this example) as part of a funding transaction such as stock lending, repo or as collateral for a loan.'
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