Saturday, December 8, 2012

Risk vs Reward

In our everyday's life, we always take on risk and at the same time we expect the same positive correlation on the rewards. That said, if you are playing a game of head and tail with your friend, you should expect at least 50% return on your rewards. Otherwise, you would essentially be playing a losing game.

Neratel, for instance, closes at 50 cents on Friday 7/12/12. At its current price, assuming a 4 cents dividend would result in about 8% yield. Now you may have heard of a mandatory offer to take it private at 49 cents. The offer has not taken place simply because market value prices them currently at 50 cents, which means to say that if you decide to jump in at the stock price now at 50 cents, your risk is 1 cents loss if the offer becomes successful. The risk reward tradeoff is favorable in my opinion.

I am vested with 25 lots.

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