Nymex IPO

My own dear brother wants to play the NMX IPO and we had the following actual discussion. I will make and post a short video clip illustrating the ideas this weekend.

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----- Original Message ----
From: junky
To: bro
Sent: Tuesday, November 14, 2006 7:50:21 PM
Subject: Re: Can we buy some Nymex?

whats the press release say they expect to open at?

---- Original Message ----
From: bro
To: junky
Sent: Wednesday, November 15, 2006 12:06:43 AM
Subject: Re: Can we buy some Nymex?



Question:

Is there a way to put a buy order in to accomplish the following logic? I want to buy 150 shares, but I don't want to pay more than $72/share. If I put in a limit order at $72, then it won't buy until it hits that point. But if I put in a market order, then who knows, it might finally execute at $102/share with some trader screwing me because market order = blank check?

These choices seem clumsy and very limited. Is there a better way?

---- Original Message ----
From: junky
To: bro
Sent: Wednesday, November 15, 2006 12:34:01 PM
Subject: Re: Can we buy some Nymex?

ok depends on what NMX opens at on Friday, limit orders guarantee min. buy price but not execution.
Market order guarantee execution but not price.

For your 72$ example, if there are options for NMX, which I doubt for an IPO, what u can do is sell puts. Say u are bullish on the stock and u dont mind owning shares at a lower price, u can sell a 30 day 70 strike put and collect $200 per contract (pulled number out of the hat).

What u are saying is u are willing to buy 100 shares of stock at 70 less the $200 u collected. so in the end of the contract period if stock was anywhere below 70, u agree to buy 100 shares at 70, subtract the 200 u got for the put, effectively buy it at 68. If stock was anywhere above 70, no stock is to be purchased and u keep the $200.

The other thing good about this put contract (selling cash secured put, or selling naked put) is that time decay is on your side. U don’t need to wait 30 days to profit from this. Time is ticking away in your favor on that put that u sold. Even if stock say at 72, didn’t move for 2 weeks, that put would have decayed some, and maybe u can terminate that contract by buying that put back for say 150, ending your obligation to buy stock, and pocketing $50.

We can even discuss selling put spreads, which IMO is much more risk averse than selling puts alone, and ties up alot less cash.