Mike, as always, thank you for your kind, thoughtful and generous response. (That't the initial buttering up so you won't get irked with me when I quibble . . . )<g>
What I said, or what I meant to say, was that predictability is a kind of rationality. You expect Haliburton to be priced low now, because oil is low, and because such companies are "out of favor." You expect oil prices to revert to the mean, and Haliburton's fortunes to improve. You expect the attention of those who are paid to call attention to stocks to eventually turn their attention to Haliburton, and Haliburton's share prices to rise. Reductio ad absurdum, you don't expect Haliburton's prices to rocket to 100 tomorrow. You are willing to "hold on til the cows come home," which demonstrates that you expect the cows to eventually do what cows do. (As a farm boy, you know they have to come home to get milked, otherwise they are in pain.)
That's not a very profound observation, and I did not mean anything more than that.
With respect to your techniques, I believe that I understand that you buy both a put and a call; that the cost of these options limits your overall gains; however, these options also limit your potential loss. As a result, you expect approximately 11% returns. Is that sort of right? Kinda, maybe, sorta? I have been downloading your explanations into a file on my computer, planning to read them all together, I agree with Skeet, you should and could write a book.
I haven't asked for explanations of the technique because you have explained things so many times, and I don't want to take advantage of your good nature.
CobaltBlue |
