Sponsored Link:
ISE’s IPO
The Smart Profits Report: Issue #189
Monday, March 7, 2005
ISE’s IPO: Finding Value in ISE’s Upcoming IPO
By Karim Rahemtulla
Chairman, Mt. Vernon Research
This week there will be an IPO worth noting.
Unfortunately, and ironically, there will not be options available on this play for a while. Unfortunately, because I think it would be a perfect candidate for both LEAPS and covered calls. And ironic because it is actually the largest electronic options exchange in the world.
This week, the ISE, the International Securities Exchange (NYSE: ISE) is going public. The initial indication is $16 to $18. It will undoubtedly open higher than that, probably in the $20s.
I will be buying some shares when I get the opportunity (I will be speaking in Delray all this week at The Oxford Club’s Investment U conference.) I suggest that you keep a close tab on these shares and, if you can participate in the IPO, you should.
An Options Play… Without Options
The ISE is not so much a play on an exchange, but it is a play on options. Options are a very fast-growing segment of the investment world and one that you as a reader of the Smart Profits Report are quite well aware of.
Still, option trading is in its infancy, with maybe 1% or 2% of the penetration of stocks. This will increase as investors become more educated, and that means better days ahead for the ISE.
So, if you are looking for an excellent opportunity to ride the options wave, look no further than shares of ISE.
Remember, it is an IPO and that means it WILL be very volatile.
NEVER, NEVER, NEVER put in a market order for shares of an IPO stock. Invariably, you will get burned.
Where I’m Buying ISE: Below $22
Based on its growth potential and profitability, I think that ISE shares are fairly valued below $22 per share. And that is where I will be trying to buy the shares.
A close comparison to the ISE is the Chicago Mercantile Exchange (NYSE: CME), which is part of the Oxford Trading portfolio. It went public at $39 in 2002 and the shares are now at almost $200.
However, the CME had more revenues, more profits and more of a reputation than the ISE. But there is potential for the ISE to become a dominant force in options, given time. And that is what I will be betting on.
Great trading,
Karim
|
Today’s Smart Profits Cribsheet
- Check out the Smart Profits Glossary for definitions of terms such as “market order” or “covered calls” found in today’s article.
Related Articles:
- Covered Calls and Puts - How to Grow Your Equity By Going Naked
- Put/Call Ratio - When this Number Jumps, It’s Time to Trade
- Option Position Sizing - How Much to Invest In Each Option Trade
