Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: labestul who wrote (15203)	3/9/2001 11:34:37 AM
From: Steve Grabczyk	Read Replies (1) \| Respond to of 18929

Hi Barry: Frankly I humbly disagree with using # of share constraints within AIM. Unless you still get some kind of break by buying in lots, or you prefer it that way. But, it is never used in classic AIM calcs other than to place your orders. Regards, Steve

To: labestul who wrote (15203)	3/9/2001 11:49:27 AM
From: OldAIMGuy	Read Replies (1) \| Respond to of 18929

Hi Barry, Right from when I first started AIMing in 1988, I have always used the "Whichever is Larger" rule. In other words, I set a minimum dollar value for a trade based upon cost efficiency, size of the account and other parameters. I set a minimum share amount on common stocks which is essentially always 100 shares or multiples thereof. This is for accounting efficiency. (mutual funds I treat differently in that I'm using Average Cost basis rather than First In, First Out) However, my next buy and sell prices are still set by whichever is the larger total value. If 100 shares is my minimum and also the larger, then my projected buy and sell prices are based upon that. If my minimum dollar value is the larger, then the predicted trade prices are based upon that. Inside the spreadsheet the formula looks at both and picks the larger transaction. I know this messes up some folks new to AIM. They'll start with 200 shares of a stock and play endlessly with SAFE trying to get an effective Hold Zone while forgetting to reset the Minimum Shares and Dollars from whatever the default setting is to something rational for the size of the holding. Once they realize that the relative size of the trade compared to the value of the holding adds to the Hold Zone, then they shrink them appropriately. This problem never happened with AIM on PAPER! Back in the "olden days" when a pencil and 13 column paper was "AIM Software", we just did the calcs and waited until the Market Order column showed something large enough upon which to act. I recommend the exercise of recording every AIM Trade transaction on 13 column paper in full Lichello spreadsheet style for AIM newbies. It's not necessary to do it weekly, monthly or any time frame; just whenever one gets a trade. Running the calcs manually can teach the user a lot about what just happened inside the Software and only takes a minute or two each time there's a trade. This may sound old fashioned, but it's a great teaching aid. Best regards, Tom

To: labestul who wrote (15203)	3/9/2001 4:17:00 PM
From: aptus	Read Replies (1) \| Respond to of 18929

Hello Barry, I'm looking forward to meeting you at AIM 2001 too. When are you scheduled to arrive in Las Vegas? Regarding the number of shares, you wrote: "However, once you restrict yourself to just one security (as the Money Spinner requires) then VALUE and NUMBER OF SHARES (given the per share price) are just two different ways of talking about the same thing" My view is that the number of shares depends on the price per share and the value of the entire investment. Now I realize you can say that the value depends on the number of shares and the price per share and you would be mathematically correct (keep in mind it is also mathematically correct to say the Price per share is dependent on the Value and the Number of shares), however with AIM it really is the VALUE that should be viewed as the independent variable. To illustrate my thinking, I'll provide an example... Let's say we have two investors, V. A. Lue and N. B. R. Shears: 1. On Monday Mr. Lue looks at a stock called ABC. Its share price is $10. Mr. Lue invests $100 into it, therefore he purchases 10 shares (I'm ignoring transaction costs for this example). Mr. Lue's minimum dollars per trade is set to $100, so he's "allowed" to make the purchase. He now owns 10 shares of ABC. 2. Mr. Lue is so excited about ABC's prospects that he tells his good friend, Mr. Shears, about ABC on Thursday. "Incredibly the value of my ABC holdings have not changed since I purchased it on Monday," says Mr. Lue. "This is big, real BIG! Purchase it now Mr. Shears!" So Mr. Shears, who also has $100 to invest in ABC, decides to make a purchase. However, on Tuesday, ABC went through a share consolidation. So Mr. Lue now owns 5 shares of ABC each worth $20. His investment in ABC is still worth $100. Mr. Shears now decides to purchase ABC, but he limits his minimum transaction size by shares. In his case, 10 shares is his minimum. So when he tries to purchase 10 shares (at the now increased price of $20) he can't because he only has $100 to invest in ABC. All he can purchase is 5 shares, but because his minimum limit is 10 shares, he's not "allowed" to purchase the shares. 3. Of course ABC goes on to behave like the Lichello cyclical example and Mr. Lue makes $1,000,000, retires and moves to Bermuda. Meanwhile Mr. Shears is destined to live out his life working until he's 65 and living paycheque to paycheque while telling everyone who will listen, "I couldda been a millionaire." 4. Had the situation been reversed and Mr. Shears bought ABC on monday (which he would have been "allowed" to do based on his minimum shares limitation) and then told Mr. Lue about it on Thursday, Mr. Lue would also have been "allowed" to purchase his ABC stake because his minimum transaction size was $100, so rather than purchasing 10 shares as in (1), he purchases 5 shares. That's why I believe the VALUE should be the INDEPENDENT variable and the number of shares (usually) doesn't matter. Regarding my example of when number of shares would come into effect, you wrote: "This is certainly a problem but only in theory." I think this problem is not limited to the theoretical realm, but can occur in practice as well (although I admit that it's usually not too big of a concern because companies historically have splits once their share price starts getting too high). However I think you'd run into a "real" problem if you tried AIMing BRK.A. If AIM told you to sell $2000 worth of equity, you'd have to sell approximately 1/35th of a BRK.A share. I do like, and agree with, your comment, "An idea or a solution to a given problem might be obvious from one point of view but apparently hidden for the other until it is finally pointed out." However I don't believe it applies in this particular case. And I certainly agree that if there was a penalty for not trading in 100 shares increments (whether as in the old days or with options) then number of shares becomes significant. However, in my personal accounts, both in the US and Canada I have never had any such restriction. I've traded all sorts of "weird" numbers such as 11, 153, 209, etc. One interesting note is that whenever I do trade these odd lots, I always receive (for the past 5 years) a message saying it might be subject to additional transaction costs. But no additional costs have ever been charged. Hopefully you can see my thinking behind my initial comment. If you have any comments, please let me know. I always give your comments careful consideration because I usually find them very insightful and logical. regards, mark.