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Qs To Be Rebalanced


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#1 Yoshaviah

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Posted 09 December 2002 - 07:15 PM

" . . . Prudential released its list of potential additions to the widely tracked Nasdaq 100 index , and those likely to be cut when the index is rebalanced in late December. . . " - article

Does anyone know when this will occur and how it will impact my short position in the Qs :blink:

#2 Goldmember

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Posted 09 December 2002 - 07:36 PM

It means SHORT THE PISS out of the candidates to be dropped BEFORE 4000 mutual funds have to sell the dumpees no longer in the index. A Canadian trading account will allow initiating a short position on a stock at ONE DOLLAR and above, as opposed to FIVE dollars in the U.S. A very large advantage for shorting total CRAP!

From the article at Yosh' link:

Tech names that will likely be deleted from the index include Applied Micro Circuits (AMCC), Atmel Corp. (ATML), Brocade Communications (BRCD), Gemstar-TV Guide (GMSTE), and i2 Technologies (ITWO), the firm said.

Easiest money you will ever make!
Anthony caused pearls to be dissolved in wine to drink the health of Cleopatra; Sir Richard Whittington was as foolishly magnificent in an entertainment to King Henry V; and Sir Thomas Gresham drank a diamond, dissolved in wine, to the health of Queen Elizabeth, when she opened the Royal Exchange; but the breakfast of this roguish Dutchman was as splendid as either. He had an advantage, too, over his wasteful predecessors: their gems did not improve the taste or the wholesomeness of their wine, while his tulip was quite delicious with his red herring.here

#3 SideshowBob

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Posted 09 December 2002 - 07:46 PM

I'd suggest buying puts instead. Then you don't have to worry about the minimums, or be forced to cover at $1.

I must admit it's a great idea!

SB

#4 Goldmember

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Posted 09 December 2002 - 08:28 PM

AMCC barely made it over $5 for fresh retail shorts. Golf clap to those who slammed it at that point.


Posted Image



ATML: This little piggy didn't fly high enough for Joe Retail to even think about it.


Posted Image


BRCD: This little piggy made it up into the Killing Fields, and has now descended into the netherland where Joe Retail short is now out of this game. Golf clap, again, to anyone who slammed this POS while it was over $5


Posted Image


GMSTE: Another little piggy that didn't have the wings for Joe Retail to even get in the game.

Posted Image


ITWO: Well, if you DO have the ability to short this thing at ONE dollar, you better short it quick because it's going, going going.......


Posted Image
Anthony caused pearls to be dissolved in wine to drink the health of Cleopatra; Sir Richard Whittington was as foolishly magnificent in an entertainment to King Henry V; and Sir Thomas Gresham drank a diamond, dissolved in wine, to the health of Queen Elizabeth, when she opened the Royal Exchange; but the breakfast of this roguish Dutchman was as splendid as either. He had an advantage, too, over his wasteful predecessors: their gems did not improve the taste or the wholesomeness of their wine, while his tulip was quite delicious with his red herring.here

#5 Goldmember

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Posted 09 December 2002 - 09:02 PM

Yes, there are some interesting puts on the first four candidates, amazingly enough. Usually I like puts for real high flyers who can lose 20 points in a good bear 10-13 week cycle decline. Options are fairly new to me and much is yet to be learned. But some of these puts are cheap. For the index dumping play January would be the month to purchase and those are still a little expensive. Let the Decembers expire and hope for a post scam week upswing till year end and grab some January puts much cheaper, if any blood still flows through these dogs veins at all by then.
Anthony caused pearls to be dissolved in wine to drink the health of Cleopatra; Sir Richard Whittington was as foolishly magnificent in an entertainment to King Henry V; and Sir Thomas Gresham drank a diamond, dissolved in wine, to the health of Queen Elizabeth, when she opened the Royal Exchange; but the breakfast of this roguish Dutchman was as splendid as either. He had an advantage, too, over his wasteful predecessors: their gems did not improve the taste or the wholesomeness of their wine, while his tulip was quite delicious with his red herring.here

#6 SideshowBob

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Posted 09 December 2002 - 09:50 PM

Goldmember,

Be careful with options. To quote my father "with options you not only have to be correct about market direction, you have to be correct about timing as well". Plus you have to contend with brokerages manipulating the averages against you.

As an example, Bernie Schaeffer is often correct about market direction but still does very poorly in his Timer Digest portfolio.

Still, for this type of play they may be the only action we can get.

SB

#7 Goldmember

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Posted 09 December 2002 - 10:09 PM

Yes, Bob, options are a two front war, BUT in this case time and direction are a given! Massive dumping by 4000 mutual funds is virtually assured if these wingless piglets get tossed. Look out below! Index reshuffling is one of the more dependable money makers. Another way to play it is to buy these piglets replacements as 4000 mutual funds will be forced to buy the replacements. All that fund buying will do wonders for a stock's price. If that coincides with a cycle up phase, WHOOOOWWWEEEE! RUN PIGGY RUN!!!

Then SHORT the CRAP out of 'em when the 10-13 week cycle starts pointing down. Ride the replacements up, take profit, SLAM 'em HARD for the ride down!
Anthony caused pearls to be dissolved in wine to drink the health of Cleopatra; Sir Richard Whittington was as foolishly magnificent in an entertainment to King Henry V; and Sir Thomas Gresham drank a diamond, dissolved in wine, to the health of Queen Elizabeth, when she opened the Royal Exchange; but the breakfast of this roguish Dutchman was as splendid as either. He had an advantage, too, over his wasteful predecessors: their gems did not improve the taste or the wholesomeness of their wine, while his tulip was quite delicious with his red herring.here

#8 SideshowBob

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Posted 10 December 2002 - 12:56 AM

If you want a second opinion on the stocks, I found this old article from Yahoo (it was cached on Google):

Salomon's choices for Nasdaq 100

It's from Oct 17, so it may be outdated....but might be worth looking at.

SB

#9 Goldmember

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Posted 10 December 2002 - 01:16 AM

Good find! Lots of stuff to wade through there!

The rebalancing is likely to take place at the
close of trading on Dec. 20, Salomon said. At that level, the
Nasdaq 100 will have come almost full circle from its 54
percent tech weighting in 1990 -- a year of recession, a
buildup to U.S. war in the Persian Gulf, and a time when the
decade's dot-com madness was just a gleam in a geek's eye.


Conveniently right on options expiration day for December! Selling will be after the occurence and buying the newcomers will also be after expiration. January is the month all right. Da Boyz may be way ahead of us on this one! Insiders will for sure be taking advantage of this! Rebalancing for insider personal profit is what it seems to amount to. Crooked bastards! An annual event no less!

What would the Nasquack 100 look like if rebalancing never occured? There may be a handful of originals out of the 100 left but not much else.
Anthony caused pearls to be dissolved in wine to drink the health of Cleopatra; Sir Richard Whittington was as foolishly magnificent in an entertainment to King Henry V; and Sir Thomas Gresham drank a diamond, dissolved in wine, to the health of Queen Elizabeth, when she opened the Royal Exchange; but the breakfast of this roguish Dutchman was as splendid as either. He had an advantage, too, over his wasteful predecessors: their gems did not improve the taste or the wholesomeness of their wine, while his tulip was quite delicious with his red herring.here

#10

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Posted 10 December 2002 - 07:23 AM

Folks, you might also want to review an article on this subject that I posted to my forum on the old board quite a while back. ;)

Predicting the changes to the NDX isn't that difficult, really. ;)

BTW, besides the obvious idea to short early the ones that are likely to be removed (and buy the ones that are likely to be added), the above article also suggest an improvement regarding what to do once the change has occurred.

Regards,
Vesselin

#11 Yoshaviah

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Posted 11 December 2002 - 10:12 PM

Anyone know how this rebalance act in the Qs is going to effect my rydex fund? Don't the stocks get pumped before they go in? Or might they get pumped after they go in :(

#12 Drano

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Posted 11 December 2002 - 11:47 PM

Anyone know how this rebalance act in the Qs is going to effect my rydex fund? Don't the stocks get pumped before they go in? Or might they get pumped after they go in :(

Yet another way we get screwed when shorting or buying puts on these indices. If they had to keep all the same stocks, every index would be much lower now. But, they throw out the dreck, bring in the stronger stocks, and the index stays up. Thanks for bringing this up, y'all, I'm going to think real hard about holding my QQQ shorts after Dec. 20 (assuming I hold them that long :grin: )
Of course I'm caustic!





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