For those who bought some LMIR rights in the fire sale recently, a question could have formed as to whether they should sell the rights and lock in some hefty gains which could be as much as 100%. That it took just two days means it is basically free money since it is within the contra period.
Indeed, from a trading perspective, why not? Traders would say that taking profit is never wrong. If price of the rights were to go higher tomorrow, I could sell some as well since I have accumulated a sizeable long position. Question, at what price? Answer, look to the Fibo lines to see where possible resistance levels are.
Beyond 4.3c, I see stronger resistance at 5.2c and 5.4c. I could do a partial divestment at those prices if they should be tested. In such an instance, I would retain half to two thirds of all the nil-paid rights I bought to convert into regular units as I still believe that at unit prices of 33c to 36.5c, we are getting great value with distribution yields of 9% or more.
Why not just keep all the rights if they are such a bargain? Indeed, I thought of that which is why I would only divest partially if higher resistance levels should be hit. This is to satisfy the trader in me which is shouting out to take profit.
If the higher resistance levels are not tested tomorrow, I will not sell any of the nil paid rights I have accumulated in the last few sessions. This will satisfy the investor in me which thinks that we are seeing compelling value in the rights.
Related post:
LMIR: Why did the rights plunge in price and what did I do?