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Re: Enterprising Investor post# 11

Monday, 06/10/2013 1:59:52 PM

Monday, June 10, 2013 1:59:52 PM

Post# of 33
To clarify, I meant a link to officially how the contract will be treated after the spinoff. I'm thinking about my old NCT 2014s and 2015s (although they are straightforward 1:1 ratio, no adjustment to strike) as I look at the smallish time value priced in the COV LEAPs. Liquidity in my NCT's has almost completely dried up and (as Olmstead has pointed out on Twitter) I may have to exercise at some point to unlock the full value. Just wondering if that would happen here as well.

To your other point, I can imagine such a thing! Was a doozy of a class in grad school and I think it was simply called Options and Derivatives taught by this guy:

Did you use a version of this book back then?

Supposedly, it still is the gold standard and many a trader keeps one at their desk, I had to sell mine to pay some bills but wish I didn't.

Back to valuation points, I would assume in that book they still talked about doing cash flow based valuations right? Industry-relative is great for growth companies but leaves you with systemic market risk (how I feel about some tech right now).

Only reason I mention it is I think that is one rookie mistake people can make. Recently, I was explaining the difference between an asset play and an earnings play. FYI my example was SHLD. Math and financial modeling is the easy part, deciding WHICH valuation technique to use (comp based, metric based, liquidation based, M&A based, DCF, etc.) requires a little experience and nuance most (or most my age and younger out of school) don't pick up initially.

Anywho, good call here EI! Prime for post-spin appreciation.

Twitter: @VincePagano