Wall Street Manna

An irreverent look at Wall Street

Monday, January 3, 2011

Goldman tips GM to 43


GS 1 (2) -

And Morgan Stanley tips GM also:

To trade what Patel calls the rebirth of GM, J.P. Morgan's equity derivatives strategists are advising clients to buy GM's March $38 calls for $1.55 and sell Ford's March $17 calls for 91 cents. They call the strategy a "call switch" though it is a derivative version of the classic pairs trade long used by investors used to take advantage of perceived pricing irregularities among related stocks.

In a pairs trade, an investor buys the stock of a company perceived to be undervalued, and shorts -- sells the stock in anticipation its price will decline -- the company believed to be overvalued. If all goes as planned, the stock that is bought increases in value and the shorted stock declines.

2 Comments:

At January 3, 2011 at 10:45 PM , Anonymous Anonymous said...

If oil roars back above $100 kiss this economic recovery good bye!

 
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