Pair trading on RBS/Barclays

[thewilbury1]

Hi there, i'm new to T2W and have only been doing the odd bit of trading. I wondered if anyone had a view on short RBS, long Barclays as a trading pair for the opening tomorrow ? bearing in mind the Friday collapse is there any mileage in this trade ?

 

[MrMiyagi]

been thnking the same thing, only with HSBC instead of RBS, so its pretty much a similar trade... looking at the spread, theres still room for it to widen... would definfitly see it as a good 6-9 month trade...

 

[dr.blix]

pardon my ignorance here.

considering that up until wednesday, RBS 52 wk low was 40p and now it's 34.7p, how come there is anyone left to sell?

they've been around 500p for the past 5 years and only in a down trend since march '07. i'm obviously missing something very simple

 

[fifty2aces]

i'm obviously missing something very simple

Yes, they're a bank.

 

[MrMiyagi]

I'm sure people were saying the same thing when they were 70, 100 even... I'm just thinking that Barclays will appreciate quicker than HSBC over the long term...

 

[dr.blix]

oh they are? i was wondering why i was getting blank stares in there when i asked for a twix and a copy of razzle.

if anyone can be bothered to explain why it's different for banks there'd be at least one person interested

ta.

 

[fifty2aces]

oh they are? i was wondering why i was getting blank stares in there when i asked for a twix and a copy of razzle.

if anyone can be bothered to explain why it's different for banks there'd be at least one person interested

ta.

If you mean why they can drop so far, leverage is a huge factor - basically they borrow a lot of money, meaning if their assets drop by a certain amount, their value will drop by a multiple of that. There has been speculation that a lot of the banks are basically insolvent already, they just haven't marked a lot of assets down enough. (I hear corporate synthetic CDOs might be an issue).

Additionally, the bailout situation is potentially going to lead to at least partial Government ownership, which would dilute shareholders' equity considerably.

 

[dr.blix]

aah, thanks for that, interesting to know a little of how it works.

 

[thewilbury1]

Thanks for the response, i did short RBS all the way down to 23p, tidy, but only broke even on Barclays as they did a prompt U turn and i stopped out.

 

[MrMiyagi]

Hi there, i'm new to T2W and have only been doing the odd bit of trading. I wondered if anyone had a view on short RBS, long Barclays as a trading pair for the opening tomorrow ? bearing in mind the Friday collapse is there any mileage in this trade ?

Well? did you trade it? Would've turned out quite nicely... Charts at 2 BARC to 1 HSNC, back when you posted it would've been traded at roughly 4:1