Replies to post #11746 on General Stock Ideas

[scstocks]

i think i doubled my money on a short term apple leaps put buys last year, or at least i did really well with it. not much money but fun.

bought the put when everyone was taking it to the moon, but the hard part, as it always is, was actually covering/selling it after a short time as the share price fell back quickly, and as you you said, the cost of those puts went way up when compared to the relatively small drop in share price.

[gfp927z]

Bigworld, >> trying to catch the very tail end of the market rise <<


But you've been trying that approach with HDGE for years now. The odds are just too slim of being able to pick a top based on fundamentals, macro economic data, hunches, etc, especially when the central bank is so intent on reflating and maintaining the markets. The Fed hasn't even allowed 10% corrections, much less a crash. Their ability to deal with a real crash has been severely limited, so they're afraid to let the market slip for very long before they apply the juice.

Using the charts has the highest chance of identifying a top, but you have to wait for a reversal pattern to form and then for key support to break. So you miss the first 5% of the drop, so what, you still capture the other 95%. And if the signal is wrong and the market resumes its uptrend, your stop loss will limit you to a relatively small loss.

With the 'hunch' approach however, 1) the odds of being right are extremely small, and 2) without a stop loss the losses snowball disastrously. But to each his own. If you try to guess the top enough times, eventually one of the guesses will be right.

Using options/LEAPS does put a finite limit on one's potential losses, unlike HDGE, but if the market hasn't crashed within 2 years you've lost the full investment. I never took the time to learn options, so haven't used them (only once). I know some savvy biotech guys use LEAPS instead of owning shares, and also as part of some complex arbitrage strategies to limit risk.

But logically, since you're already so heavily hedged on the short side, why go even further short? It goes completely against the time proven wisdom of moderation and diversification. Personally, I will consider not losing wealth during the coming crash to be a victory.