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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Bald Eagle who wrote (44311)	6/13/1999 12:59:00 PM
From: pooh	Read Replies (1) \| Respond to of 120523

Agree. But this method work well for long term investor who hold on to a specific stock that he/she is not ready to let go, but hate to sell since he/she will have to declare tax and still cannot make up his/her mind whether the stock really tanks or will recover later. Take AOL. If you hold the stock since it was 20 a year ago (split adjusted), you would hate to sell now and declare the 400% gain this year since you like to hold it until you retire. You also think that it will going up, but you don't have the stomach to see your portfolio value to drop daily. And like the rest of us, you have no idea where the market would flow. Your solution is to short the same amount of your long AOL, using the margin from your long AOL (so you won't need more capital). This will let you sleep well at night no matter how the market go in this choppy time, since your portfolio rate of change is zip, none, zero. Perfectly balance (except for the margin interest). You can wait until the Fed announces the interest rate and cover your short (or sell your long) while having no gain or loss during the up and down time. If you do option, selling cover call may be an alternative, since you'll get the fee for selling cover call. For short term trader? I'd sell it if it hit the stop that I set right after I bought.