Low Risk/High Reward Trades
<<<I have in my quiver is this: there is the company; Source Media and then there is the stock and, as you surely realize, the two are distantly related.>>>
Ken,
I agree with you here completely. But I think you will find, without exception, companies who are:
1. Without profitable services or products,
2. That have decreasing revenues and increasing expenses,
3. That have a history of promotion & HYPING,
4. And have insiders who begin selling LARGE chunks of stock (20 mill)
3. And that suddenly have strong runs in their stock - based on RUMOR <?>
I think Ken, that you will find well over 90% of these type businesses are out of business in short order. And for the majority, the stock does not just drop, but they typically are sued class action style, have, SEC investigations & bankruptcy. The stocks are often de-listed or left trading for pennies.
Taking a long term approach to shorting these stocks is historically a very successful strategy, as the downside and trade profitability are considerable, and the percentage of winning trades is alarmingly high.
My long term shorts have all been winners (100%), due I believe to good DD. That's a hard record to dismiss.
Those long here are wishing and hoping - based on a Rumor. Come on, step back and look at how comical that is. I have yet to know a single person in my 18 investing years that was right on 1 out of 20 rumors.
Those short know the company has a history of promotion and non performance, huge unserviceable debt, huge historical losses, non-profitability and lack of business plan execution. IMO it's just a matter of time.
The bottom line is simple. We all want to make money trading. That's what we're here for right?
I suggest before betting the farm on a rumor, everyone long and short objectively weigh the upside and downside potential of this stock and the risk/reward involved in your position. This is not about being right, but capital preservation and appreciation - making the low risk high reward trade.
Good luck investing
Steve |
