<I'm not really good at short term calls on stocks. I have been buying cpq for several years.>
Night Writer: Not many people are good at strategies using puts and calls. Effective option management demands that typical long term investing be limited to the length of the call or put when in a selling mode. Buying calls and puts, is dangerous, with odds in favor of the seller due to diminishing time premium. I feel investors should understand the concept of covered calls when they find themselves is an issue whose short term (6 months) future appears to be down or neutral. Selling covered calls enhances rate of return when combined with a dividend. In short, why should I sit on a stock for years waiting for questionable growth or dividends. Either sell the issue or implement a program where the investment is working for you.
Regarding the reference to the Fortune article by Joseph Nocera, it is excellent. This is real life on the street. An investor who performed all the fundamental analysis prior to Kurlak's announcement didn't mean a hill of beans. That's why I place more significance on trends, news etc.
"Thomas P. Kurlak, who follows semiconductor stocks for Merrill Lynch, got on the squawk box at his New York office and stunned the firm's sales force with an unexpected bit of news: He was downgrading Intel from; 'strong buy' to 'neutral.' Merrill Lynch's legions of salesmen immediately began phoning the big institutional share holders -- mutual funds, ---"
The problem here is how many of the individual investors got the same notice? And, because the news was announced prior to market opening, the individual investor woke up to a decrease of $7 in the Intel price. Major funds, etc., got out in the after market.
When I pay a premium price for a trade as an individual investor, does ML or any other full service broker get me out prior to the announcement during market hours? LESSON: Try and be smarter than your broker and/or his analyst (In some case, not too difficult)
Mike |
