Stocks and Trading Thread - Channeling your inner Mono

[Admiral Yi]

I sat on the sidelines for a long time unsure, get what I deserve for always being so hesitant.  Apple at @110, Amazon @160, Tesla @35, PBI @18....   


Too damn cautious.

If you were in the market at all in '13 you should have done all right.  Great year.

Anyone have any suggestions on what to do with the cash from PBI?

[MadImmortalMan]

I'm being really careful about adding positions atm. The market is pretty shaky. I still have MSFT and a couple days ago I added some Core Labs. Also a little Micron as a spec, but I'm ready to drop that on a whim if necessary. I've been selling calls against things to hedge the drops, but they haven't been too bad in any case. I shouldn't have been hedging Microsoft, maybe. Blunts the upside a bit.

[Admiral Yi]

Maybe I'll  just part it in T then, which is my bond substitute.

[Baron von Schtinkenbutt]

Dividend is still pretty good on AT&T, though.

My former dividend cash cow, AAR, as finally paid off for me.  I got special preferred shares in the new American at a rate of 1.17:1, converting to common stock over 4 months.  With the gains the new stock has made since the conversion, I have doubled my money from what the original AAR position cost me, not counting the cash paid before the old American went tits-up.  I may flush the position once the conversions complete in April, though.

If anyone is interested in somewhat risky, high-dividend (10% - 12% yield) stocks, I have been doing very well with BKCC.  With dividend reinvestment I'm up almost 21% since May 2012, despite the stock's price volatility.

[Admiral Yi]

Dividend is still pretty good on AT&T, though.

Which is why I'm treating it as a bond substitute.

What line of work is AAR in?

[Alcibiades]

Dividend is still pretty good on AT&T, though.

My former dividend cash cow, AAR, as finally paid off for me.  I got special preferred shares in the new American at a rate of 1.17:1, converting to common stock over 4 months.  With the gains the new stock has made since the conversion, I have doubled my money from what the original AAR position cost me, not counting the cash paid before the old American went tits-up.  I may flush the position once the conversions complete in April, though.

If anyone is interested in somewhat risky, high-dividend (10% - 12% yield) stocks, I have been doing very well with BKCC.  With dividend reinvestment I'm up almost 21% since May 2012, despite the stock's price volatility.

Seems pretty stable over the past 5 years, excluding the crash where everyone dived.  Got any more information on the stock?   Been thinking about investing deep into something, been waiting to get back into intel - with a .22 dividend....but if I can get 3600 shares with the same amount..... 

[Admiral Yi]

Yowza.  Major correction underway.

Any guesses where the S&P 500 will bottom out?

[DGuller]

  I guess those adverts about a 90% market correction this year I've been seeing were true.

[Alcibiades]

I just sold out of everything besides an ETF that I'm already down so much on it doesn't matter.


Here's hoping for a good ride.   

[MadImmortalMan]

Puts on SPY help a lot on days like this. If you hate the market as a whole but like specific things and want to keep them it's a good way to do it.

[Ed Anger]

My Total SA is hanging on. It hits 54 and it'll sell to.

[Alcibiades]

Puts on SPY help a lot on days like this. If you hate the market as a whole but like specific things and want to keep them it's a good way to do it.

Can you ELI5 how exactly puts work?  Sorry for my ignorance, I know what they are, but not exactly how they work.

[MadImmortalMan]

Puts are a contract to sell at a certain strike price. They become more valuable the closer they get to the strike price, and a lot more after they pass that point. If they are past the strike price (lower for puts, higher for calls.), then you can exercise them--execute the trade specified. Each put is worth a hundred shares. So exercising it would give you a sell short position against whatever the put is on of a hundred shares.

When I use them, I nearly always just sell the puts back because they tend to track in value the same as the profit you would have made on having the short position on the underlying security they represent. If selling SPY short 100 shares yesterday would have made you a profit of $100 today, then a put on SPY bought yesterday would be worth roughly $100 more than you paid for it today. But selling 100 shares short costs a lot more money than an option does. So it's a way to get protection to the downside without risking tons of money, and the potential losses of doing it are capped at a small fraction of the value of the shares being controlled by you.

[MadImmortalMan]

The reason I hedge with SPY is because there is the most liquidity there and you can be reasonably sure you will get the prices for things you expect--just because people trade it so much. If you have options on a stock that trades few options, you might not have buyers and sellers moving them when you want to trade. DIA is heavily traded as well.

[Phillip V]

What's next?

http://online.wsj.com/news/articles/SB10001424052702303442704579363301581514102