market speculation for October

[KTP]

Yes, this is exactly what the analysts have done with Microsoft (Goldman). They downgraded and depressed the price to an absurd level compared to the rest of the tech market. I see the opportunity here to make a really good return, but I don't have the funds available to buy a large enough chunk of the actual stock.

A 10% move up if I own the stock will make me $500 if I own the stock, or $5000 if I own the options. I recognize I am being greedy here, but I don't think buying an option is a lot different from buying the actual stock in a low priced biotech firm whose existence rides on the outcome of a drug trial. Both are going to be worthless if the gamble does not play out.

[gambler2075]

I recognize I am being greedy here, but I don't think buying an option is a lot different from buying the actual stock in a low priced biotech firm whose existence rides on the outcome of a drug trial. Both are going to be worthless if the gamble does not play out.

Well, with the biotechs, the reason why the contrarian philosophy is best applied there is that the price moves are greater than in any other area of the stock market. Bios typically have moves of 70% down or 150% up, which is not possible in other areas of the stock market. CHTP was up well over 100% in a couple of months after I bought my 1/4 million$ position at 3$ per share on Aug 10th. I posted about it but was pooh-poohed and made fun of, so I decided to stop posting exact ticker symbols. Same thing with SPEX. So for this next un-mentionable stock ticker that I own a 1/4M$ worth of, I will not post it, until it is over, like SPEX.

Anyway, with the huge moves that happen in the bios, this is why I believe playing the stock, rather than options, is a much more feasible idea, rather than in the tech arena. Also with biopharma the price movements don't really care what the overall stock market is doing, whereas the tech area does care. Now that the market has run up so much and we are so close to that blowoff top (imo) I think it becomes increasingly dangerous to invest in stocks as a market pullback would annihilate most investors.

But we will see what happens.
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[Scanner]

BA,

I"m sorry. . .I wasn't trying to demean your position, only just clarify (and maybe strengthen) mine. I love your contributions and look for you to reply on my threads. YOu aren't one of the bad guys (never thought that). And no, I don't think of you as "party line." (not entirely - you part sometimes and I am not totally contrarian either).

I was looking at this way - you were saying "Be careful." Well, I'm sure that was the benefit for other readers, right? Because I am sure KTP, me, you, et al understand that the speculative part of his portfolio is well, speculative. He could be ready to lose it at any time.

I guess a position can be made that if he concentrates his money into one single stock, that he has "undiversified" that part of his portfolio, that 10%-15%.

The question in my mind is. . .well, every investment is a balance of risk and reward. What's the upside reward? What's the downside risk?

If there is risk there, I guess I want to see a defined reward, which is what a future or an option does. This way you can decide the risk better? No?

I think if you just play a stock, well, you don't know what it's going to go to. . .I guess you could sort of think like a futurist or optionist and think a stock is going to go up or down and just go with that stock.

Ah, well, I'm rambling. . .I guess I am saying the opposite of what you are saying:

"Don't be careful." At least with that part of your portfolio. Anyway, I hope your life stress calms down nonetheless.

[Scanner]

gambler,

don't you find the problem with stocks though that there is no such thing as an "undervalued" stock.

That is, if you are factoring in a biotech. stock is going to come out with a patent on a drug in let's say 60 days. . .well, you can be assured that that little piece of news is already in the stock price.

Isn't that what market capitalization is all about?

[gambler2075]

gambler,

don't you find the problem with stocks though that there is no such thing as an "undervalued" stock.

That is, if you are factoring in a biotech. stock is going to come out with a patent on a drug in let's say 60 days. . .well, you can be assured that that little piece of news is already in the stock price.

Isn't that what market capitalization is all about?

Absolutely disagree... I start with the premise that analysts are out there to screw you. I mean, how do you think analysts make their money? IMO, the majority of them make exactly the wrong call, which I believe they are using to get weak hands to sell, or the greedy to buy. The whole "The markets are absolutely efficient, therefore all information is known and acted on already" bit is a line of BS.

The 'information' is put out there for a reason, and that is to get the retail investor to do the worst possible thing (trading wise). Why is that? because then the smart money can load up and unload at much higher prices.

I have seen this so many times, literally hundreds of times in the biopharma arena, that I am certain it happens intentionally. The problem is that most people lack both the experience, knowledge, and the intestinal fortitude, to march to the beat of their own drummer. And as a result, they sell and buy at the worst times. Who was buying CHTP at 3? Me. Did I have alot of company? Not among retail investors, but certainly smart money was loading up. Why? Because they knew that CHTP was likely to trade much, much higher in the future, and so it benefitted them to get the little guy to give up. They did this with a combination of bashing on messageboards, negative articles, and misdirection. Saw it a hundred times in other stocks.

Anyway, if you want, you can believe that all information is out there, and there is no way you can beat the market. All I can say is that, then I must be a very lucky trader to have beaten the market to the tune of a 3000% (29X increase) in my portfolio in 2.5 years, over about 500 trades.

g

[KTP]

I kind of agree with gambler. Trading on the swings of microsoft stock is how I increased my IRA from $1700 to $31,000+ in 8 years. (Also I was lucky and had it all in Exxon when the market crashed, so I only went down 20% when everyone else went down 40%).

If I had stuck my $1700 into the S&P500 8 years ago I would have about $2000 today. Not great for the high risk portion of your portfolio.

I really wish I had purchased $15,000 of the $25 calls at $1.50 though. $5,000 was a pretty weak investment when I feel this strongly about a upward move in the next month. I still control 10,000 shares with the $27.50 calls, but I will probably exit at a $28 stock price because the time value of my options will be declining and the stock will probably bounce between 27 and 29 through december, depending on the election outcome. Or maybe I will sell half my position when it equals my initial investment, then let the rest ride until early January. I haven't decided yet.

I wish I had the guts (and money) to do $250,000 trades like gambler...

[gambler2075]

I wish I had the guts (and money) to do $250,000 trades like gambler...

There isn't anything stopping you, just press the 'buy' button

No, but seriously, I don't think it is a good idea to commit more into your trades until you have shown, at least to yourself, that you are persistently profitable. I was not sure that I had an 'edge' until I had made probably about 1000 trades and I knew that the probabilities were on my side. Does that mean I am going to win every trade? heck no! but it means that if, overall, you have an edge, then you can distance yourself from the outcome of a single trade, and play the overall probability of your trades, cumulatively.

It is impossible for a new trader to be confident in his trading decisions because he really does not have the track record he can look back on and say "Yeah, I have won 80% of the time, over the past 500 trades, so I know it is very likely that I will win on this trade"... If you have only traded maybe 10-15 times, you have no idea if your results are from luck. As I have noted, being up thousands of percent I 'know' at least to my satisfaction, that I do have an edge (or at least it is highly likely that I do) and so I can let my trades play out.

Trading In the Zone helped me out alot with the psychology of trading.
Amazon.com: Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude (9780735201446): Mark Douglas: Books

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[gambler2075]

I guess what I am trying to say is that, until you know you have an 'edge', meaning you have a reproducible way of being profitable, then trying to beat the markets is truly, gambling.

Take an analogy of poker. For the average, non-professional player, going to a casino and playing poker is purely gambling. However, for those professional level players, playing poker is not truly gambling, as they do have an edge over the competition, and over thousands of hands they will end up being profitable. Could you really say that, for a professional poker player, that it IS gambling? I don't think so. Sure, they will lose some of their hands, absolutely. But over the long run, they will be profitable.

I believe the same thing is true for stock trading. Over the first hundred or so trades you try, even if you win many of them, there is no way you can say that you truly have an edge. However, over thousands of trades, and looking at a portfolio that is up thousands of percent, I think there will come some point where any rational individual would say that it is highly unlikely that all of those results were due to chance. I have come to the point where I realize that it is highly likely that what I am doing with my trades is not really gambling (despite my username ) and as a result, I have confidence that overall, my trades will be profitable, cumulatively speaking.

I also believe that it is basically impossible to get to that point in trading before 4-5 years. As I have talked to a few of my professional trading buddies, and have seen hundreds of wannabe traders fall by the wayside, it really takes at least 3-4 years of dedicated attempts at trading to start to know what you are doing. All of the successful ones I know blew up their accounts at least a few times, before they ironed out the kinks. Some of the failed traders I knew spent way too much time and money before they realized that they had psychological hangups preventing them from ever trading profitably. To be quite honest, I still would not advise anyone trying to get into trading to try at all. I think for the vast majority of people, a decent, stable job is a much better goal to work towards, as it is essentially a guaranteed paycheck.

good luck,
g

[gambler2075]

I really wish I had purchased $15,000 of the $25 calls at $1.50 though. $5,000 was a pretty weak investment when I feel this strongly about a upward move in the next month. I still control 10,000 shares with the $27.50 calls, but I will probably exit at a $28 stock price because the time value of my options will be declining and the stock will probably bounce between 27 and 29 through december, depending on the election outcome. Or maybe I will sell half my position when it equals my initial investment, then let the rest ride until early January. I haven't decided yet.

I don't mean to be a wet blanket here, but I don't see where you have any kind of edge here. I do believe that, in the vast majority of cases, trading off charts, or trying to predict prices in the absence of any predictable catalysts, is not a long-term winning strategy.

I believe that the vast majority of people who try and then fail at trading are trying within a subset of trading where they actually have no edge. I know that that is the case for myself and most intraday trading.

However, for swing trading the biopharmas, like I have said before, I have seen many cases where the media and smart money depress a stock to absurd levels while they load up massively. Then, guess what, 3 months later, they make everything out to be roses, and they sell at a huge profit. So my area of biopharma investing involves analyzing the situation for what it truly is, and seeing how the stock prices are irrationally oversold. As I said before, the vast majority of publicly available information anywhere is kindergarten level, and some of it is misleading. That is my niche and it has been working for me.

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[KTP]

I don't mean to be a wet blanket here, but I don't see where you have any kind of edge here. I do believe that, in the vast majority of cases, trading off charts, or trying to predict prices in the absence of any predictable catalysts, is not a long-term winning strategy.

Ah, I see. You have assumed that I am approaching this investment with just basic information about the company. This happens not to be the case.

[gambler2075]

Ah, I see. You have assumed that I am approaching this investment with just basic information about the company. This happens not to be the case.

Only time will tell... I will say that the vast majority of people who try to play the stock market and think they have done sufficient DD to be correct are, indeed, just going off of analysts and published articles which are designed to lead them astray.

If this trade itself works out for you does not say either way if you truly have an edge. However, if you can show me 500 trades and your winning percentage, combined with your total % profits, then I will be convinced. Certainly a 1000% profit or whatever you had over 8 years is a good start.

But good luck anyways.
Let us know how it turns out (and I mean that sincerely, not sarcastically)
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[Scanner]

When I called my broker (Charles Schwab), they said if I were to get an options account that it would have severe limitations on it, that I could only do one kind of trade (forget the term).

[KTP]

When I called my broker (Charles Schwab), they said if I were to get an options account that it would have severe limitations on it, that I could only do one kind of trade (forget the term).

Don't blindly follow my options investing! I am just playing around with a small amount of risk capital. I wouldn't want you to lose your kid's college fund or anything!

I think there is a greater upside potential than downside risk in microsoft, however I am not dumb enough to think there is no way I can lose my whole investment. This is a major reason why I only invested $5,000 instead of a larger percentage of my IRA. The rest of my IRA money is still clawing it's way back up from a poor purchase of Exxon at $66 when I thought that was a low point.

I think there may be a dip before the runup anyway. I may jump in there with some actual stock purchase with the majority of my IRA monies by selling the Exxon, as I have even more Exxon stock in my regular accounts (luckily purchased at $59 and sitting on a large taxable capital gain right now, so not easily moveable).

I am not really liking the 27.50 calls, even though early morning they were up 22%. The time value declines too fast, and there is the very real possibility the stock stagnates in the $26 to $28 range until expiration. I have pretty much made up my mind that if the stock hits $27 before earnings, I am selling enough of the contracts to cover my initial investment while the time value is still large. I will hold the rest of them until december and the $30 price I have in my head as a fair value for microsoft.

[Scanner]

I wasn't going to blindly follow your trade.

I was investigating options on USO, SLV, or GLD as a way of gaining exposure to the commodities futures market but when I called they said becuase I am limited/unexperienced I could only do one kind of trading.

He explained it to me. . .and I can't remember what it is. Le'ts say USO is running between 35 and 40/share. . .when it reaches 40, in expectation of it dropping to 35, I take out a specific kind of contract against my own shares of USO.

Well, I don't understand it and that is a rule of investing - if you don't understand it, then don't invest in it.

(unless you are a World Banker. . .then you can buy toxic waste )

[KTP]

He explained it to me. . .and I can't remember what it is. Le'ts say USO is running between 35 and 40/share. . .when it reaches 40, in expectation of it dropping to 35, I take out a specific kind of contract against my own shares of USO.

I think you are refering to writing a covered call. This was also the only thing on the level 1 options trading at etrade. I had no problem getting level 2 options trading though, which allows the purchase of puts and calls. I don't see why they could care if you buy to open a call...there is no chance of losing anything but your initial investment, and no loss to them (they even get a lot of money from the trades ($9.95 + $0.75 per contract at etrade).