Personal Investing

[Dak]

But industrial silver demand is/has been outstripping production for years. That's the point. And now with the misplaced confidence eroding from paper investments, sales of physical PMs are skyrocketing.

 

[zabu of nΩd]

Well based on recent silver prices i'm sure demand is near an all time high. As far as industrial production, the rise in electronic consumption is accompanied by a decline in photographic consumption, so the overall isn't so clear there.

There's something weird about the numbers in those USGS charts. They say at one point, "Apparent Consumption = Production + Imports - Exports ± (Stock Change)" but no matter how i play with the numbers in the downloadable spreadsheets, i can't find a clear mathematical correlation between the apparent consumption and the supposed component numbers. It's also gay that they stopped reporting the end-usage statistics at 2003 (or at least they haven't updated that historical chart since then).

 

[Dak]

Coinciding with the Iraq invasion.....

JP Morgan has been accused of suppressing the price of silver for several years now by massively shorting silver shares. The accusation is there is no actual silver to back up the shares, so it's a smoke and mirrors game to keep panic out of the PM market.

Edit: What Jim Rodgers has to say: http://buygoldandsilversafely.com/gold/jim-rogers-says-possible-gold-correction-and-is-long-dollar/

Now is the time to be buying more metals, or in the near future as it corrects and builds a new launching point. The next surge, probably spring/summer of next year is going to be ridiculous.

 

[Dak]

Fed just telegraphed buy Gold and Silver now

 

[Der Morgenstern]

Good thing I bought shares in Barrick and Silver Wheaton back in November.

 

[Dak]

Nice. If I were to invest in any stocks it would certainly be silver mining.

 

[Draehl]

While I have a degree in Finance and have been a stock broker for just shy of a year, I still haven't done any personal investing. That being said I do have a solid knowledge base and have done a decent amount of reading and paper trading. Honestly, I'm in love with the idea of selling calls and puts. IE sell a put on a stock you're willing to buy at a certain price. If it doesn't drop you take in the premium every month. If it does, you just got PAID to buy a stock you wanted anyway. You then turn around and write calls on the same stock at a price you're willing to part with it at- get paid monthly and automatically dump it when it reaches expiration if it's in the money. Seems as it would work best on stocks with a moderate amount of volatility. No penny stocks, but not blue chips either.

 

[The Ozzman]

While I have a degree in Finance and have been a stock broker for just shy of a year, I still haven't done any personal investing. That being said I do have a solid knowledge base and have done a decent amount of reading and paper trading. Honestly, I'm in love with the idea of selling calls and puts. IE sell a put on a stock you're willing to buy at a certain price. If it doesn't drop you take in the premium every month. If it does, you just got PAID to buy a stock you wanted anyway. You then turn around and write calls on the same stock at a price you're willing to part with it at- get paid monthly and automatically dump it when it reaches expiration if it's in the money. Seems as it would work best on stocks with a moderate amount of volatility. No penny stocks, but not blue chips either.

Man, options trading is something that really intrigues me. I took a course dedicated to derivatives and I think I could do pretty well with it if I had the money to do it.

You could always enter into multiple positions (straddle, strangle, etc) if you're concerned about volatility.

 

[Draehl]

Yep. Though, really, I view buying calls/puts as playing on big moves. You definitely can make a lot of money if there is a large move, but if it moves against you or stays stagnant you're out that premium. With selling the same contracts in a cash secured put or covered call scenario you're essentially padding your return/reducing your loss and forcing yourself to stay methodical in your investing rather than waiting it out for "that extra 5% more..." or other emotion driven decisions.

 

[zabu of nΩd]

You finally got me to read up on options and get a vague idea of how they work.

So compared to a limit sell order, selling a call sounds like a no brainer assuming the commission isn't crazy expensive. On the other hand, if you have a price target and want to take yourself out of the emotion driven decision to hold out for more profit, you could potentially gain a lot more with a stop-loss order, no?

 

[Draehl]

A stop order is to get out of a position you already own on the down side to keep from losing more.

A limit order is an outstanding order to buy a stock at a lower (than current price) if you don't own it OR to sell it at a higher than current price to take your profit off the table. Limits can be thought of as an ideal, but not currently existing situation, while stops are to get away from a bad situation.

Options on the other hand are contract where if you buy the option you have the right to buy (call) or sell (put) a stock at a pre-determined (strike) price listed in the contract. IE a stock is at $20 you can buy a call for $22 for, say, $0.30. At any time before or until the expiration of the contract, your can exercise your right to buy the stock at that strike price. So if a stock jumps up to $23 you exercise your $22 option contract to buy the stock at $22, you then re-sell the stock for $23. Your net gain is $23 - $22 - $.30 - $.70 per share.

What I'm talking about with writing calls and puts is instead of being on the side where you buy the right, you're selling the obligation. So if I sell an $18 put, I get paid for taking on the obligatory side of the contract. If the stock drops to $18 or lower I may be assigned (IE forced to buy) the stock for $18. The obligation can be a bad thing if you're just trying to take in the income, but if you want to own the stock at $18 anyway, you can essentially get paid the price of the contract to have a limit order out there. The inverse is true by writing a call- if you already own the stock and are comfortable selling it at, say, $23 then you write a call, again getting paid to have a sell limit order on the upper end of the market.

The primary downside of both is when you sell a put the stock could be dropping through that strike price... so it may very well be trading at $15 a share and you have to buy it at $18 a share. Likewise, if you write a call you are limiting your potential gain on the stock to your strike price in exchange for getting cash for taking on that obligation.

 

[zabu of nΩd]

Yeah selling options sounds awesome, i'll definitely be thinking about that for the future. Right now i'm still leaning toward a value investing strategy though, so i may end up basing my positions on a "top x stocks by value" list instead of setting price targets. I've still got a lot of learning/planning to do on valuation -- i think it's best for me to focus on that before planning out how i want to do the actual trades and how to time them.

 

[Dak]

My father has been taking a course to do what Draele is talking about, if I understood them both right. It is supposedly the most risk-averse way of playing the market.

 

[zabu of nΩd]

From my investment amateur point of view, i think the keys to really becoming competent at investing are (1) knowing what's available to buy on the financial markets, (2) knowing what affects the value of each thing for sale, and (3) knowing how transactions on the markets work.

 

[Draehl]

And the killer: researching a company well enough to spot the value in it that isn't expressed in raw analysis.

 

[zabu of nΩd]

Well said

 

[Dak]

And the killer: researching a company well enough to spot the value in it that isn't expressed in raw analysis.

Yeah, that is the biggie. I think the course my dad is taking basically says learn just a handful of companies inside an out, and then just ride those stocks with options.

 

[The Ozzman]

Draele: Don't forget that you don't HAVE to exercise the option if it's out of the money (ie: less than the strike price). Hell, you don't even have to exercise it if it's in the money. You could probably have a better profit scheme from just buying and selling the options themselves, rather than exercising the option and owning the stock outright.

Yep. Though, really, I view buying calls/puts as playing on big moves.

Meh, options work best as a hedge against losses IMO. The speculative aspect of the market makes it more liquid obviously, but I think it's most efficient if used as a hedge exclusively.

and if anyone is wondering how options are priced:

http://www.hoadley.net/options/bs.htm

 

[zabu of nΩd]

@ozz: from what i can tell, buying options doesn't have a role in draele's profit strategy.

how would you propose to make good decisions when it comes to buying options (as opposed to selling them)? that sounds like it requires some kind of macroeconomic analysis that could be very hard to do with any accuracy (or beat the "experts" at).

hell, i wonder how much a successful news/ad campaign put on by a media or marketing group can affect the major stock indexes.

 

[zabu of nΩd]

http://www.hoadley.net/options/bs.htm

That shit looks fucking insane. I'll have to stare at it sometime when my brain is working and see if i can make sense of it. I'd probably have to look up a ton of functions and see how they're graphed, ugh