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

To: LemonHead who wrote (15459)	3/31/2001 4:39:29 PM
From: Bernie Goldberg	Respond to of 18928

Hi, One thing that I learned early about investing was do anything you don't understand fully. We've got a chinese guy here in town who had been talking to one of his customers about options. He's also talked to me about AIM. He told me last night that he stopped reading the book. His english isn't very good and he didn't understand the book. He also told me last night that he followed his other customer's advice. Which he also probably didn't understand. You see he lost over $85,000 in one day! I didn't ask him how that happened, I really didn't want to know. I can see where covered calls is a usable adjunct to AIM if one has a large enough holding to fit in with AIM's requirements. That would be a minimum of 2000 shares. 5% of 2000 is 100 which I believe is the smallest contract you can write. Regarding other options, I probably know even less than you claim to. The other book you bought refers to timing the market with index funds. I must have at least 5 books on timing market. One of them is by Robert Lichello. It works just fine for me.<ggg> you wrote:I really believe that I have some good companies at exceptional costs To my way of thinking that is the one of the most important parts of the AIM methodology. Buying good companies. It is a subject that doesn't IMO get enough coverage here. Instead we're told to look at charts. If the price used to be high and now it is low, that makes it a good AIM candidate. As far as I'm concerned that's hogwash and I have never been to Arkansas.<gggg> Seriously, holding good companies and having $$ invested that are not meant for necessities will give you the patience and intestinal fortitude to hold on until they come back to a more normal level. See you in Vegas. Bernie

To: LemonHead who wrote (15459)	4/2/2001 10:03:38 AM
From: Todd Reichardt	Read Replies (1) \| Respond to of 18928

Hi Keith, Some thoughts on shorting using AIM. One easy way to short using AIM is by AIMing a bear fund, such as a Rydex or ProFunds S&P500 fund that does the inverse of the S&P500. Since the fund does the inverse (i.e. when the S&P500 goes down the fund goes up) AIM should handle it nicely. If you wanted to short a stock using AIM, you could do a relatively simple calculation that mimics what the bear funds do. Essentially you'd establish a "short stock XYZ" fund. To get the "short stock XYZ" fund prices take your starting price of stock XYZ as the starting price of the fund, then for the next day's price of the fund take the first day's fund price and multiply it by (1- (percentage daily gain/loss of stock XYZ)/100). The resulting prices could be fed directly to AIM just as the bear fund prices can be. Its a relatively simple calculation that would only take minutes to do, which doesn't require daily action (i.e. you could do it at whatever frequency you use to make AIM buy/sell decisions). So that's one possible HOW, but I think there's an important WHY to consider as well. If you have a trading system, theoretically speaking you can improve performance AND reduce volatility if you can add a system that is negatively correlated with the first system. Take for instance if you are trading stock XYZ using AIM (call this system 1). If you can find another stock or index when traded using AIM (or any other method) that is negatively correlated with XYZ (call this system 2), then trading it can improve your performance and give you less ups and downs in total portfolio worth than if you traded system 1 alone. The interesting part is that is it can do this even if system 2 when traded by itself is a losing proposition. (Oh I just know I'm going to get beat up over that statement, but its true). The easiest way to get a negative correlation is by shorting. Hence, shorting provides one the opportunity to both increase returns and reduce volatility in one's portfolio worth, that's why I think its at least worth looking at. Todd