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One never knows, or at least shouldn't if you're intending to take advantage
of privileged information, why insiders in concert are selling into their
stock's strength. But looking at insider and analyst history which I have
online, there is a pattern of insiders leading the way.
Generally, insiders buy in concert before analyst' ratings firm, and
insiders sell in concert when they are of an opinion that their stock's
momentum is out of wind. The usual hedge play is to use options of the stock
or a stock index option. (A whole position can be structured only with
options, too). But I'm curious to discern the value of any tracking error
between a company in "pork" and "pork futures."
Colin
-----Original Message-----
From: Bill Wynne [mailto:tradewynne@xxxxxxxxxxx]
Sent: Tuesday, November 27, 2001 9:57 AM
To: cwest@xxxxxxxxxxxx; omega-list@xxxxxxxxxx
Subject: Re: which pork prices to use
>Given one is of the opinion that the insiders know something the Analysts'
>don't, which is often the case :-)
Often true, but sometimes they are just getting closer to flat rather than
getting short. By definition and necessity they may be "long" the underlying
cash product which they can't sell as easily as the futures.
Maybe your hog hedge is based on hedge(d) hogs.
:-)
BW
>From: cwest@xxxxxxxxxxxx
>To: "Omegalist" <omega-list@xxxxxxxxxx>
>Subject: which pork prices to use
>Date: Tue, 27 Nov 2001 09:18:39 -0700
>
>I'd like to see how useful a hedge using "pork" futures might be, and I'd
>appreciate suggestions as to which is the most indicative contract of pork
>prices. For example Smithfield Foods (SFD) is one of the world's largest
>pork processors and hog producer. Recently the price moved to news highs,
>however, the insiders at the company have been selling into the momentum.
>Going against the trend if you will.
>
>Given one is of the opinion that the insiders know something the Analysts'
>don't, which is often the case :-), which pork futures contract could be
>most useful to buy to cover a short sale of SFD? (I'd also expect to factor
>in the value of a futures contract and ratio its volatility in relation to
>SFD's volatility).
>
>Thanks in Advance
>Colin West
>
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