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Talking stocks, trading, and investing in general - Page 188

post #2806 of 5242
Quote:
Originally Posted by djh View Post

My philosophy when it comes to shorting anything? Don't.
It's not worth it. Inherently the max profit you'll make is 100%.
Not only do you have to be right about a company, you also have to have the right timing. Which makes it twice as hard.
If you don't like a company, don't buy it. Move on and find other opportunities for growth. It's a lot more fun.

 I agree

Quote:
Originally Posted by krn.nyc View Post

I want to short Apple. I think it'll go down in the intermediate/long-run.
Having been interested in the tech hardware world for a while, I see Apple's sky-high market share as an imminent sign of its downfall. To be considered the most valuable company in history within such a volatile industry is not the best news: ask Microsoft, back when it was the most valuable at the height of the 2000 bubble. With the gap left by Jobs, the pace of innovation is slowing within Apple; I believe the iPhone 5 was the last phone in the works and you can sense much of his influence wasn't exerted on that product in his last years. It wouldn't surprise me if a leaner and more agile tech company reinvents the tech landscape and is able to topple Apple in a few years (as Apple's package of hardware and software did to Microsoft's software).
Apple still holds the most leverage in the industry due to its high market cap and talent. It still has the potential to be the highest inflation-adjusted valued company in history if the greater global consumer markets are still untapped and it continues to release blockbusters like the iPhone and the iPad. But at the first sign of troubling news (i.e. management woes, a bad conference event, etc.) , I will short Apple due to my belief that an increasingly clunky and slower-moving organization can never remain on top in the tech industry.

 As already said, I'd highly advise against shorts as they can get ugly very quick. If you think Apple will decline, look into buying long term put options on it. That way if the price keeps jumping like it has, you're only out the cost of the options.

Quote:
Originally Posted by CYstyle View Post

Scary to short AAPL. Like in your example MSFT, it only fell 50% from it's peak. but irrationality is a crazy thing, if the economy starts to recover and people start buying stocks etc, who knows what AAPL could go up to. Kind of like Whitney Tilson, who had the balls to short NFLX. He was correct, but he went in at like $100 something, only to see nflx go to $300 before it finally collapsed.
If you really wanna short, best to not be a hero, and short it on the decline.

I agree. Generally the gains don't outweigh the risk.

post #2807 of 5242
I've met many people smarter than myself that have decided to grenade their portfolios in either one of two ways; naked shorts and selling options. I usually do not hear anymore about their investing prowess after either of these two choices are made.

It's usually shortly after I suggest not doing so, which only happens if they ask my advice. Sometimes doing well is reason enough not to take more risk.
post #2808 of 5242
Quote:
Originally Posted by SkinnyGoomba View Post

I've met many people smarter than myself that have decided to grenade their portfolios in either one of two ways; naked shorts and selling options. I usually do not hear anymore about their investing prowess after either of these two choices are made.
It's usually shortly after I suggest not doing so, which only happens if they ask my advice. Sometimes doing well is reason enough not to take more risk.

It's just a different venue to invest money. Options are a fantastic way to hedge your risk. Writing covered calls is one of the best strategies you can do in my opinion. You may miss out on big gains, but you have the opportunity to make small gains bigger, or hedge your losses.

 

To those who are unfamiliar:

You already have a position in the equity.

You write (sell) a call option-You would receive money for that option

If the stock price falls below the value you paid- You lose less money than had you not written the call, but still own the stock

If the stock price rises above the strike price- You just sell the stock and profit the price of the call

 

Or the best option:

The stock price is higher than the price you paid (cost basis), but lower than the strike price- You profit the cost of the call, and the gains from the current price compared to your cost basis.

 

Writing covered call options are excellent if you think the stock price is going to move very little.

post #2809 of 5242
I should be more specific, I'm not talking about hedging strategy, instead I'm talking about naked options trading. I agree they cn be helpful when used as intended.
post #2810 of 5242
Quote:
Originally Posted by djh View Post

My philosophy when it comes to shorting anything? Don't.
It's not worth it. Inherently the max profit you'll make is 100%.
Not only do you have to be right about a company, you also have to have the right timing. Which makes it twice as hard.
If you don't like a company, don't buy it. Move on and find other opportunities for growth. It's a lot more fun.

Thanks for the advice- you're right about the max profit being 100% with shorting. Another bad thing about shorting is that losses can theoretically be infinite.

I should have specified that I see Apple falling in two years or so. They'll continue to have strong numbers through these next several quarters since they're still riding the wave of innovation they've enjoyed, but I can't see them realistically growing at the same rate in the long-term. If you look at the volatile tech hardware industry in the past decades (IBM, Apple in its early days, Sony, Nokia), market leaders fall off precipitously after a stretch of incredible growth, mostly due to disruptive small companies. This is also based heavily off my intuition- which is never worth very much in the markets- but I can't help feeling that Apple might return to its Dark Ages soon (Newton era). I am actually a huge fan of Apple, as well as Jobs.

Just because I'm interested in the concept, how would you go about using put options in taking a risk that a company's stock will plunge? I understand the hedge aspect of the option when you're in the buy position of the stock but don't exactly understand it on the flip-side. Can you give a concrete example randomhero?
post #2811 of 5242
If you think AAPL will drop in the next two years, look into buying leap puts. Essentially they're out of the money long term put options.

I would agree it's a very good possibility that AAPL will be at $400 in the next couple years. Honestly not sure how I feel about their reliance on Google, and how at the end of the day they need Google and not the other way around.
post #2812 of 5242
I'll take anyone's bet on apple being below today's closing price 2 years from today.
post #2813 of 5242

Didn't know about this thread... *subscribed*

 

LONG AM/AMZKF, AOK/ATXDF, BCC/BCGYF, MMT/MAUXF, MSEH, MUX, ORT/EORBF, SEA/SDCJF,  TEXC (I know, very overweight in oil/e&p)
 

post #2814 of 5242
Quote:
Originally Posted by randomhero88 View Post

It's just a different venue to invest money. Options are a fantastic way to hedge your risk. Writing covered calls is one of the best strategies you can do in my opinion. You may miss out on big gains, but you have the opportunity to make small gains bigger, or hedge your losses.

To those who are unfamiliar:
You already have a position in the equity.
You write (sell) a call option-You would receive money for that option
If the stock price falls below the value you paid- You lose less money than had you not written the call, but still own the stock
If the stock price rises above the strike price- You just sell the stock and profit the price of the call

Or the best option:
The stock price is higher than the price you paid (cost basis), but lower than the strike price- You profit the cost of the call, and the gains from the current price compared to your cost basis.

Writing covered call options are excellent if you think the stock price is going to move very little.

Yeah I do this on all my shares. Few hundred few dollars monthly to spend on horse ass
post #2815 of 5242

In the marketplace, shorting is the most precarious way to express your view of the world. Whats more is you have to get your timing right. Otherwise the cost of the short will eat through your capital, even if the stock trades sideways. If you believe so much in your thesis, do as djh suggested and buy LEAPS. Much safer, for you, and you will only loose the premium.

 

IMO Apple will be a situation where it declines slowly then quickly.

post #2816 of 5242
Quote:
Originally Posted by krn.nyc View Post


Thanks for the advice- you're right about the max profit being 100% with shorting. Another bad thing about shorting is that losses can theoretically be infinite.
I should have specified that I see Apple falling in two years or so. They'll continue to have strong numbers through these next several quarters since they're still riding the wave of innovation they've enjoyed, but I can't see them realistically growing at the same rate in the long-term. If you look at the volatile tech hardware industry in the past decades (IBM, Apple in its early days, Sony, Nokia), market leaders fall off precipitously after a stretch of incredible growth, mostly due to disruptive small companies. This is also based heavily off my intuition- which is never worth very much in the markets- but I can't help feeling that Apple might return to its Dark Ages soon (Newton era). I am actually a huge fan of Apple, as well as Jobs.
Just because I'm interested in the concept, how would you go about using put options in taking a risk that a company's stock will plunge? I understand the hedge aspect of the option when you're in the buy position of the stock but don't exactly understand it on the flip-side. Can you give a concrete example randomhero?

Here is a really neat spreadsheet I found so you can play around with seeing your gains and losses. I did not make this, but it is very useful.

http://financetrain.com/my-library/?did=18

 

I'd recomend doing a bear spread which is (buying a call and selling a call with a lower strike price) or (buying a put and selling a put at a higher price). It is a good way to learn to trade, and your only possible losses would be the difference in strike prices.

 

For instance:

Buy call with a $30 strike price for $7

Sell a call with a $20 strike price for $16

$29 is your break even point. At $20 you would make $9. At $30 you would lose $1.

 

Obviously the prices wouldn't be set up like that, but hopefully you see my point.

post #2817 of 5242
Bought SRPT a couple of weeks back under $15. DMD drug data was fantastic, opened +115% this morning. Sold it, now it's +170%. Fuck everything facepalm.gif Ok so that's being greedy but still, I can't help it...
post #2818 of 5242
Quote:
Originally Posted by ac21686 View Post

Bought SRPT a couple of weeks back under $15. DMD drug data was fantastic, opened +115% this morning. Sold it, now it's +170%. Fuck everything facepalm.gif Ok so that's being greedy but still, I can't help it...

Nice!!! let us know before then! hahahaha
post #2819 of 5242
Good call! I'm looking for those kinda gains on AMRN once NCE is announced on the 12th I believe.

Still eyeing GLUU for re-entry.
post #2820 of 5242
Same here Javyn
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