Hello lastlaugh, Gave you a t/u for this thread on the oppies vs heads in correlation to futures type scenario...
There is a loose correlation - I mapped the entire rally from the day before to now and it was interesting. The thing is though - the indicator is mechanical and lacks predictive power because it often wrong. This method correlates on a day to day basis only - with a 50% success rate (roughly). If you generalize it is useful however so let's take a look - if you have interest that is.
Before launch - 20th Sep - BOB's at 0.3c premium - was that due to accumulation by those that had an inkling and were looking for maximum leverage? I don't know did not look that closely as this aspect.
21st - moved to premium (closing prices not intra-day tick) and price was up strongly - it there was a correlation it was certainly wrong. ie. gap spread markedly and price had miles to run. But price up - oppies gapped.
So it went - until 10c with spread from 0.4c to 1.1c max - remember this did not predict the following move correctly however spread was lower then.
The next break out was Oct 1st - gap narrowed to BOB premium on close but head closed off high - BOB didn't. Bullish and right too - correlation to what you were saying and predictive too. ie. gap narrowed ahead of SP up move.
Big jump 4th Oct spread widened to 2c (on adjustment for strike price of course) - bearish very short term but right - very short term. Then gap narrowed for a few days as price cooled - getting more bullish right?? Oct 8th SP went up and spread increased - correct again - but wrong short term even as price jumped further on the 12th. Maxed at 3c on that top price day - perfect prediction. As price fell to 15th Oct the spread fell to 1c. Short term correct yet it did not predict the continued consolidation we are now in.
On the next rise to 19th Oct is spread back to 2.5c but has since narrowed. Wilson and Jus are right - the buyers are stepping up and oppies may continue to narrow. You are right about the correlation and have shared something of worth so well done - but it is general again - not always right either.
Taking it one step further is to measure the spread in % terms and by this measure the current discount spread of 1.5c is about 10% of head price. Will that prove right or wrong? You may be right but I think the market or any news would be far more important.
When AVB was 2.6c the BOB's traded at a premium of 11.5% When AVB was 6.9c the BOB's traded (average) at disc 7.7% (correlation to your theory correct however predictive power was poor) When AVB jumped to mid 9c range n/c - predictive power excellent. When AVB jumped violently to 20c spread increased - correlation correct - disc on BOB's circa 10%. As price settled slightly BOB's traded at a low disc 7% - slight increase in risk. Common disc in this period was 10% as price fell before next leg up - little predictive power. When we jumped to ST top spread increased to 3c - correlation and predictive power excellent. As price fell to 13c area spread fell again to low of 7.5% with average circa 10%. Then price jumped - so did spread...
As I said seems mechanical - yes this is a phenomena - yes it does have limited predictive power. That is where it stops - perhaps when AVB was asleep for 2 years we saw a BOB premium. I could not base my trading off this - although it is useful which is why I broke it down for you all.
lastlaugh is right about this - I disagree with some of your other views and hope you don't mind that i do so - but I do listen carefully and take a good look when a theory is bandied about. All views are welcome.
Cheers, CW DYOR - but I am here for the HGZ's and there are several of them. Mises is probably right - could be mining them for next 10 years but would like AVB to ramp up production and become a significant producer for our (and their) benefit.
AVB Price at posting:
14.5¢ Sentiment: LT Buy Disclosure: Held
