Baby Steps
>>A little while ago INTC was 62 and IBM was 80 neither was doing much let alone hitting new highs...each stock has its breakout out of the box...this is MU's...<< "GR"
>you haven't grasped the concept of making money, have you? ibm and intel make money. mu hasn't and won't for a long time. jeff<
Looks like I'm gonna get dragged into this fray. I have been following this thread for quite some time now, and its really entertaining (and occasionally informative). I normally don't respond to posts etc. I just do my thing and keep tabs on what others are doing and claim to be doing. Bulls? Bears? Who cares? I don't. Something I picked up a long time ago is that there are good companies and there are good stocks. They do not always go hand in hand. What I have learned to look for (over the past ten years) is good opportunities. That's the big question. Where are the good opportunities? How can I exploit them to maximize my gain and minimize my loss. There will be losses. Just keep them down. Stops, as someone pointed out earlier, just don't get it done. At least not for me. More on this latter.
Jeff's retort about the Grimster's "grasp" prompted me to offer the following info for those who are interested in making money in the market vs. those who are interested if some fricking company is making money or not. I love the analysis too. ASP, EPS, UPS, PMS??? Who cares. What matters is if YOU can make money or not. That's it. Plain and simple. So here goes...
First off, what the hell are my qualifications? I could tell you, but then everyone would pick at them. Given the nature of this group, I would be disappointed if it didn't happen! :]
So I will leave it up to your judgement after reading this. It really doesn't faze me either way 'cuz >I< don't get any more or less profit, but YOU might. And isn't that the overall premise of these kind of groups? Helping others in the pursuit of profit. Or am I way off course?
Secondly, the stuff presented here will not work for everyone because of the money involved to pull it off, but that's not my concern. It works for me. Where there's the will, there's a way. I'm just ponying up my way. Take it or leave it. No playful banter. No flaming. No guarantees either. Many of you may even use it already. I didn't invent any new "wheels" guys.
So what the hell is it dude? Okay okay...... Here are the BASICS. There's a lot more to it, but I ain't got the time to spell it all out.
1) Look for highly volatile stocks with good liquidity.
I think big MU fits the bill here.
2) Cross reference these stocks for options. MU has 'em.
3) Screen the CURRENT month's out-of-the-money (or just barely
in-the-money) calls for high time value. MU works again.
4) Here's where the high powered math comes in <g>. Rather than
write out the play, I'll give an example.
Using today's numbers:
MU closed at 35 1/4 on 6.9 mil shares
December 35 Calls were 2 1/8 to 2 1/4 Open Interest=17463
December 32 1/2 Put-skis were 3/4 to 7/8 Open Interest= 4322
For the sake of the example, let's deal with 1000 shares and
10 contracts.
Buy 1000 MU @ 35.25. Cost = $35250.00
Sell 10 (MULG)DEC 35 Calls at the BID and get paid+$2125.00
Buy 10 (MUXZ) DEC 32.50 Puts at the ASKED and pay - $875.00
Net+$1250.00
Gotta deal with a deep discount broker to keep commies down.
The listed trade should cost under $30
The 10 contracts should go for about $60 each or $120 total
30+60+60=$150. So take that out of the $1250 above. $1100 now.
So who can tell me the possible outcomes on 12/21/96 when the options expire?
A)
The stock is above the strike of 35 and the 1000 shares get called
away. You get paid $35000 and you keep the $1100.
Don't forget, you paid $35250 so take out the $250 hit which
leave a tidy sum of $850.00 on a $35250 investment in 16 days.
What the APR on that?
2)
The stock tanks below 32 1/2. You can hang onto the stock OR you PUT the stock to the buyer @ 32 1/2 in which case you get paid $32500 for something you paid $35250. The loss is $2750 BUT you still have $1100 to ease the pain OR a net hit of $1650. Basically a 5% shot. How many of your shots are only 5%?
Much better than a STOP because you WILL get out at 32.50 per share
vs. hope to get stopped out. Also, its up to you if you actually sell
or not because you own a PUT OPTION which does not obligate you to sell the stock. How many of you have been stopped out and have the stock come right back the next day?? This does not happen here.
d)
The stock ends up between 35 and 32.50. You can do this one.
There are many other variables and plays in this arena to eek out a few more percentage points.
To sum up this monster post, the premise is to take little bites every month which add up nicely over time. Your upside is limited and fairly regular, but you minimize the losses as stated previously.
Its like being a Casino. You book the bets and live off the "vig" or house advantage. The gamblers can hit the jackpot (stock goes to 50) and they can also hit the skids. Casinos can't buy puts however. ;)
BTW, if $850 ain't enough juice. Multiply everything by 2 or 3 etc.
FYI, I do this for a living. I use this and other tactics to make a decent amount of money (six figs) every year. This is not investing, so all you buy and hold guys-n-gals, this ain't for you. There are no sure bets here folks, but its a damn good way to hedge the bets you do make. -Johnny |
