Stink Bids – What, Why and How…
by Dudley Baker, November 4, 2009Print
I’m sure you have heard of this term, ‘stink bids’. They are but one way of insuring a low entry price in some of your favorite junior mining companies.
Whenever I hear the term I always think of Doug Casey, Casey Research which is where I recall learning about them years ago.
Many of the junior mining shares are thinly traded and they frequently have large spreads between the bid and ask price. This situation actually sets up the opportunity to place ‘stink bids’.
Say you have a favorite stock or perhaps a warrant which you want to buy but the price has risen substantially. You still would like to purchase the shares but being a savvy investor you don’t want to chase the price higher.
Each of us may pick a different ideal entry point based upon our respective analysis and review of charts, etc. at which point we decide to enter a buy order at substantially (25% - 50%) below the current market price. Thus, a ‘stink bid’ is what we enter in hopes of a sharp market decline in the shares. Thus we are there with our ‘stink bid’ to capitalize on this, at least, short term imbalance in the trading of the shares.
Personally I prefer to use ‘stink bids’ only after I have established my core position in the shares or warrants. If you do not already have a core position you may never have the opportunity to buy the shares if they just go up, up and up. So, first get on board with a nice core position and then if you would really like to own substantially more shares, then a ‘stink bid’ can be very useful.
Currently, I have a few ‘stink bids’ out on some of my sleeper shares and warrants. If I get an execution on my ‘stink bid’, great. If not, well, I already have a nice position and am contend to ride with my current holdings.
Copyright © 2009 Dudley Baker
Dudley Pierce Baker is the owner and editor of Precious Metals Warrants and Insiders Insights. Articles are written by Dudley Baker along with contributing editors, Arnold Bock of Mendoza, Argentina and Lorimer Wilson of Toronto, Canada. PreciousMetalsWarrants provides an online subscription database for all warrants trading on junior mining and natural resource companies in the United States and Canada and a free weekly newsletter. InsidersInsights alerts subscribers when corporate insiders of a limited number of junior mining and natural resource companies are buying and selling.
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