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Politics : Formerly About Applied Materials
AMAT 261.90+0.4%Dec 26 9:30 AM EST
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To: advocatedevil who wrote (59395)1/25/2002 11:43:32 AM
From: BWAC  Read Replies (2) of 70976
 
<I feel my true "safety net" is the fact that I only trade with money that I can easily afford to lose. >

Of course. The only way. But for the sake of argument isn't this what you really mean?

Step 1: Account #1 Long Term Hold. Rules: Buy a stock that has good value, good trading volatility, good volume, good long term fundamentals, using only money you can afford to invest. You should be reasonably confident this stock won't self destruct and is fairly valued. Hold this stock with no trades.

Step 2: Set up Account #2 Trade stock selected in Step 1 mostly short. Design is to create cash flow from the daily movement and volatility. Perform this in a regular, constant routine, ensuring that you are almost always essentially in a hedged position to mitigate up or downside risk. Account #2's basic function is cash flow. Cash flow generated by the trades.

Note: Step 1 and 2 are essentially performmed at the same moment in time

Step 3: Roll cash flow into buying additional shares for Account #1. Which EITHER serves to allow more share hedging in Account #2 or serves to allow participation in Capital Gains of the selected stock. (Based on your discretion and gut feel at any particlualr moment or trend)

Step 4: Keep with it. If you don't actively trade the hedge it doesn't work.
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