Don’t Believe the Hype! (Part 1)
Posted by Mark on October 11, 2016 at 06:49 | Last modified: September 22, 2016 16:41Almost two years ago, a new guy started posting in an e-mail list I read. Today I am going to paste some of his posts. The moral of the story here is don’t believe the hype: any trade has risk and can always lose!
On April 12, 2015, GB wrote:
> Hello Mark… Did you use quality Delta Puts for
> the coal stocks? I work with a guy who lost tens
> of thousands…now he is in the dog house with the
> wife who is… threatening divorce if he trades
> again. I had him backtest a couple his major losers.
> He came back really upset because he could have
> used Puts to offset the loss. He had heard about
> Puts but never used them. I’m all for taking the
> middle ground using Puts for consistent weekly
> profits. Matter of fact, the lower the stock drop
> the more the Put increases. Then, you might be able
> to buy higher Puts to get out of the dropped stock
> to recoup even more cash. Hmmm! I’m going to run
> numbers on that last idea.Thx. [italics mine]
On April 12, 2015, GB wrote:
> …think of it like this: You keep getting premiums
> and dividends you will recoup all of your money and
> the rest will be “gravy” forever into the next
> generation. Also, look back to see if ITM Puts
> by 1 or 2 strikes would have made you money on the
> initial position. I do not care to own stock for the
> long term. I use my employment retirement account
> for funds. I will use index funds for my IRAs going
> forward. I use stocks as a financial tool…like a
> hammer or saw. I use to get stuck in a stock when
> it dropped…but usually way back on top after 2
> weekly trades. I believe the “hype” is out of a
> stock when it drops…so the coast is clear to keep
> it and make premiums until it is ran up, again…
> like an upcoming dividend.Thx [italics mine]
In another post, GB wrote:
> Mike, I’m not an analyst but I’m sure your right…
> coal will save the country. I agree not to be afraid
> of a paper loss. Too many of my co-workers dumped
> their retirement shares in 2008. They lost, big.
> Those who stayed and kept putting into their
> retirement accounts are rich and retiring out this
> year and next!! Do you mind if I check out those
> stocks? [italics mine]
Yes he minds because he likes to control all the shares?!?
No, incidentally, Mike did not praise coal stocks nor did he say paper losses do not matter.
Until I conclude next time, recognize that any trade can always lose and that without risk there are no profits!
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