“Battle stations, battle stations” blared the onboard intercom as Kirk Douglas ordered the aircraft carrier turned into the wind.
The nuclear powered aircraft carrier, USS Nimitz, on a routine patrol in 1980, was getting ready to do battle with the Empire of Japan on the eve of the attack on Pearl Harbor in 1941.
Spoiler alert: The freak storm that sent the Nimitz back to 1941 returns, and the ship is safely returned to 1980.
The Final Countdown is still one of my favorite time travel movies. And, a great movie to watch with the kids. You can use that as an excuse if you want to see it again.
What if I told you I could send you back in time, not to 1941, but just by a day. Leaving aside all of the REALLY cool stuff you could do, let’s focus on what you could do in the stock market.
It could be a day during earnings season when some really big names are reporting. You could in essence get the news before anyone else. You’d make a killing buying the stocks that you knew were going to have good earnings and shorting those that, well, fell short.
Let’s enjoy that thought a moment. Just trade one day a year, knowing the outcome. No “Buy and Hope” strategy.
No worry about the Fed announcing a rate increase. No worry Trump will call the Chinese a nasty name and crater the market on trade news. No worry that announcements from politicians in Europe, China, Russia, or the U.S. will sink your portfolio for no real reason.
I know, it sounds crazy…
Wishful thinking…
But is it? My bread and butter trades are ones which appear to the average person to have predicted the future before it happens. I get the same response all the time.
“Everyone Knows”…So What
I tell someone about a trade, take a beach ball type trade for example, and their response is, “well, if you know it, then everyone else must know it, so how is it that it keeps working?”
I live a mile from the DC border. If I drive south half a mile on Connecticut avenue, in the direction of DC, gas costs $2.76 per gallon. If I drive north half a mile on Connecticut Avenue, away from DC, gas costs $2.28 per gallon.
Yet somehow, the station that charges $2.76 always has cars at the pump and hasn’t gone out of business. EVERYONE who drives on the road knows. Yet, many don’t care, or don’t pay attention, or some other reason I don’t get.
Clearly just because people know things, or could know things easily by looking online, or going that extra mile, doesn’t mean that gas prices a mile apart will equalize, or that your average trader will take the time to learn high percentage repeatable trading patterns.
As Close to Going Back in Time as You Can Get
So, how about those going back in time trades? Crazy? Not so much.
Let me give you one more scenario.
Let’s assume a company releases news after the close that goes something like this:
Company X has entered into a new agreement with Well Known Cruise Company (WKCC). The new agreement extends the term of the original agreement to ten years for the 16 ships currently sailing under the WKCC banner and covers all new WKCC ships that come into service during the term.Additionally, commencing in 2020, X will become the exclusive health and wellness provider on all WKCC operated ships. The expanded relationship adds a minimum of 13 ships to the X fleet; 10 ships currently in the WKCC fleet and 3 soon to be commissioned ships which have been announced.
Collectively, these 13 ships represent an 8% increase in the number of ships in X’s fleet. Under the new agreement, X will continue in its long standing role as WKCC’s exclusive partner in the supply of spa, beauty, nutrition, fitness and related beauty, health and wellness and medi-spa services.
L.F. Executive Chairman of X, said, “We are very excited to announce this new agreement that extends our longstanding and mutually rewarding relationship with WKCC. We are also thrilled to announce that X is expanding the relationship to become the exclusive health and wellness provider for the entire WKCC fleet. This agreement demonstrates the confidence WKCC has in X and is a powerful testament to X’s exceptional customer service and consistent ability to develop and execute successfully at sea.”
G. F., President and CEO of X, stated, “We are very pleased to announce the new agreement which further increases our leading global market share at sea beyond the 80% we enjoy today. We look forward to continuing our successful partnership with WKCC as we continue to enhance guests experience.”
If you saw that press release, where do you think the stock of company X would be trading the next day? Likely up.
Now, it’s like one of those logic puzzles, we don’t have enough info to know up how much, but we’re likely seeing a pop in this stock.
Now for the fun part. That is an actual press release from an actual company. (You’re a smart cookie, I’m sure you already guessed that.)
So, did the company move up on that news? Nope. Here’s the chart of the warrant for Haymaker Acquisition, the SPAC (special purpose acquisition company) that was acquiring Company X, OneSpaWorld, from the article above. (I did add HYACW to the Warrant Watch List the next day.)
So why didn’t Haymaker Acquisition (HYAC) or the warrants, HYACW, move higher on the good news out of OneSpaWorld?
The answer is pretty simple. Haymaker did not yet own OneSpaWorld. The shareholder vote to approve the acquisition of OneSpaWorld was taking place the following week.
The result? HYAC/HYACW was frozen in time until the acquisition was approved. There you have it, you CAN time travel to trade a stock, or at least get the same result. The warrant has traded up 23% since 3/1. Not a bad return for travelling back in time.
Now, was there a possibility the acquisition would not be approved? Of course, we’re still trading stocks here, and there is always some risk involved.
But C’mon Man, there were no indications that it would not be approved, which there almost always are when a SPAC makes a bad, or very risky, acquisition move.
This is about as low risk as you can get in a stock warrant trade. Even if the stock warrant doesn’t move up, there’s a very low risk that is moves down after the positive news.
Want to learn some more ways to travel back in time, or freeze a stock in place so you can get your trade in before anyone else? You’ll learn several right here.