People are funny. Sometimes the best sales pitch that a salesman can make to a customer is, “Oh you mean this? No, you don’t want to buy this! In fact, stay completely away from these all together; you don’t know what you’re getting yourself into…”
Nothing makes people more curious and more interested than a secret. I’ve written several times on Trading Common Sense about stock options, and every time I issue a variation of the same warning: options are extremely risky and volatile, and I do not recommend that inexperienced traders trade options at all! And then what do I hear from readers? “Hey Wayne! Great article on beta today, I really learned a lot. Hey, listen: if I buy October calls for Netflix, what strike price do you think would be the safest price that I could still make a decent amount of money?” Continue reading
Have you ever bought something and then had buyers remorse? Or realized after the fact that you over-payed? Of course you have! All of us have at some point or another. But if this type of thing happens to you consistently or repeatedly, you might need to be extra careful trading stocks.
My approach to selecting and buying a stock is to choose the company/stock that I like first, and then watch and wait to see if/when the stock reaches a price that I like. In that sense, it’s easy for me to look at a stock purchase as a negotiation. I’m the buyer, and I have a price I’m willing to pay, and the market is the “seller,” actually composed of thousands of individual sellers. When I decide at what price I’m willing to buy a stock, I set a buy order that will remain open until my price is met. In other words, I am haggling with the market every day. “I see you’re asking $17 per share for Bank of America, Mr. Stock Market,” I said to myself in my mind like a lunatic in March of this year, “Would you take $15?” And of course, as is the case with many of the conversations that take place inside my head, a deal was not reached that day. So I walked away from the bargaining table. Continue reading
I’ve mentioned several times that I don’t do much option trading. In certain specific situations, the leverage that options provide is just too tempting to pass up, but most of the time options are not a great investment. In fact, about three out of every four option contracts expire worthless, which is something you should think about the next time you consider buying options.
But just because I haven’t bought any options in nearly a year doesn’t mean I don’t pay attention to the options market. In fact , I don’t have to go back too far at all to remember the last time something I saw in the options market gave me a good idea of what was to come in the stock market. Continue reading
I’ve had a lot of fun watching the circus surrounding Apple’s unveiling event today. I even spent most of my lunch break watching Apple’s Stocktwits feed. Never have I seen such a combination of intelligence, overconfidence, absurdity, naivety, desperation, backpaddling, un-backpeddling, re-backpeddling, and general confusion. I loved every minute of it.
Day traders are a never-ending source of entertainment for me. And I couldn’t resist stoking the fires a little bit myself: Continue reading
I try to write about a wide range of stock-related topics here on Trading Common Sense. And let’s face it: there is a lot to learn about the market. But if sometimes I start to sound like a broken record with the “perspective” and “patience” and “timing” and “discipline” stuff, it’s not by accident.
You see, there are thousands of things that factor into whether or not a person is a good trader. The best traders in the world are good at most of these things. But you and I don’t have to be one of the best traders in the world to make a lot of money. I always want to be the best at everything I do. But when it comes to the stock market, simply being a “good” trader still makes you money. Continue reading
A few days ago, Apple officially announced its long-rumored mysterious “event” scheduled for September 9. What should Apple shareholders expect from this event?
Let’s start off by laying out what many Apple shareholders do expect from the event. The CNN article linked above states:
Multiple reports over the past few months have suggested that Apple plans to roll out two versions of an iPhone 6 this year, with screens that are 4.7 inches and 5.5 inches, when measured diagonally. Continue reading
About three months ago, I wrote a post about why it’s dangerous to listen to self-proclaimed stock “experts” instead of doing your own research. In that post, I included the same graph of my portfolio compared to the S&P 500 that can be found on the cover (and throughout the inside) of my book. Continue reading
The big news when it came to Amazon this morning was that the company bought Twitch for $1 billion. After reading countless analysts’ opinions of the purchase on CNN Money and Yahoo Finance and then turning on CNBC and getting several more earfuls, I felt I had a pretty clear picture of the analysts’s opposing views of Amazon’s acquisition. I read that Twitch was, “a service that lets users watch and broadcast video game play.” I also read all of the statistics, including 55 million monthly visitors and more web traffic than HBO GO. So I had done all the research that could be reasonably done about what exactly Twitch brings to the table from a nuts-and-bolts perspective.
I am not a gamer. My nerdiness has always been focused in a different direction. So this morning, I had the briefest of chats with one of my best friends about Twitch. I simply asked what his impression was of the site. He told me, “It’ll probably end up being like a nerdy youtube. ‘Professional’ gaming is a thing now, and Twitch has that market pretty well covered.” Continue reading
Hewlett-Packard released their quarterly earnings last week, and the market’s reaction to the news has been awesome so far for shareholders like me. The company produced earnings that were in line with expectations and issued forward guidance that was at the high end of the expected range. There are plenty of summaries of the numbers online, such as this concise article by Mark Vickery on Zacks. Today, I’m going to focus on a particular part of the Hewlett-Packard story: how and why the stock market consistently gets ahead of itself. Continue reading
On Wednesday, I wrote about the Maximum Pain Theory and the role it plays in share price movement. The main idea is that the actions of option writers drive share prices toward nice, round numbers, or the “max pain” strike price.
The example I looked at was Apple, which, after breaking above $100 for the first time since it’s stock split earlier this year, has seemed to be “stuck” right around that level all week. I predicted that, because of the large number of outstanding Apple options with $100 strike prices, “It wouldn’t be surprising if Apple toes the $100 line for the rest of the week and ends up ‘pinned’ very near $100 at the end of the trading day on Friday.” Continue reading