help me hedge

hi all
I am really new to this game and have started to play with share trading with an aim of building a healthy portfolio of stocks to generate dividend. I know I have basically missed the boat this so year am starting to accumulate with next year in mind.

I am sniffing around fairpoint group Frp.lse as the projected yield is good and the price low and stabalised. The problem I also want hedge my self but not sure what sector to use. The company is debt financial advisory so what is the opposite to debt? I

Haighster said:

hi all
I am really new to this game and have started to play with share trading with an aim of building a healthy portfolio of stocks to generate dividend. I know I have basically missed the boat this so year am starting to accumulate with next year in mind.

I am sniffing around fairpoint group Frp.lse as the projected yield is good and the price low and stabalised. The problem I also want hedge my self but not sure what sector to use. The company is debt financial advisory so what is the opposite to debt? I

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Missed the boat??!

Its being built as we speak.

A Bear market is the best time to start investing for long term. :clap:

Haighster said:

I am sniffing around fairpoint group Frp.lse as the projected yield is good and the price low and stabalised. The problem I also want hedge my self but not sure what sector to use. The company is debt financial advisory so what is the opposite to debt? I

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Fairpoint is largely neutral on fundamentals - where did you get the 'projected good yield' from? Moat isn't a bad guy to have on board but the whole personal debt management thing is chasing the wrong market. I mean, can you think of a tougher market to make money in than trying to fleece poor sods who have got into debt in the first place?

If you're into fundamentals and stuff, check out Company Refs (are they still Hemscott?).

To answer your question, first off, why hedge? If you’ve got a conviction on a company, why dilute your enthusiasm with insurance premium?

But check out the technicals on this bunch. Moat bought a stack of stock at £30 less than a month ago which could be a sign of strength, or, my view, a sign of desperation. Full year performance is below consensus. Stock is struggling to rise above £32. Plunge on profits warning.

Why would you want to own this dog?

as I said I'm definately new to the game
the idea around hedging was buy cheap stocks and hedge to safe guard on price drops while aim to profit on the divs - at least while I learn the basics

Any suggestions or criticism most welcome

How far can cheap stocks fall?

How many cheap stocks deliver a dividend?

What derivatives or instruments are there available to hedge lower echelon stocks?

This is not a good strategy.

If you're looking to hedge your (relatively) cheap stocks, you might want to try a few conservative option strategies. You could for example sell call options at your target selling price. This can generate a nice income if done correctly. Ofcourse, if the stocks you own sky rocket, you'd still be stuck selling at the strike price of the call option contract you wrote. Just remember though, that if you're writing options, make sure you're covered with the stocks.

Peder, where are you going to find options on stocks like Fairpoint? Even if they existed, the volume/OI would be so low as to make them more of a liability than the underlying.

TheBramble said:

Peder, where are you going to find options on stocks like Fairpoint? Even if they existed, the volume/OI would be so low as to make them more of a liability than the underlying.

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I guess I should have read more carefully, I didnt see the part about fairpoint. Also, it is listed on the LSE..