Any investors here?

[Ares]

No...Strange story..We experimented by digging up some guy buried in Giants Stadium in NY. My cousin Bruno kept calling him Hoffa..We dumped him in the bag, and then in the lake...But like I said, there was no way to get the bag up without the body

Did you ever hear of this guy Hoffa?..I never did

Hoffa.... nah sounds like a made up name bruh. :lol:

 

[Nail Polish]

I figgered

 

[JimJohnson]

My recent distraction has become learning about investing in the stock market. Is anyone here putting money into mutual funds, individual stocks, bonds or even options traders?
For the last 10 years all my money has been in the Vanguard S&P 500 mutual fund but I have been playing with the idea of moving some of it into a few individual stocks.
An interesting theory I just stumbled across in the three investment portfolio that uses a total market index fund, a bond index fund and an international market index fund. Basically the theory is that if you portion your money within these three mutual funds, and keep funneling money into it, that you will outperform 85% of all professional speculators.

For you young guys http://efficientfrontier.com/ef/0adhoc/2books.htm basically invest 15% of your income.


So, any investors here?

I trade for a living. Let me know if you have any questions.

 

[botfly10]

One of the biggest class divides in this country (the world?) - or maybe one of the biggest causes of class division - is people that know what to do with money and people that do not.

Personally, I fall into the later. I got a lot of money sitting in a goddamn savings account. Soon as I get some time, I have to learn what the **** to do with it.

I watched my friend's dad quit his job (as a neurosurgeon) and liquidate all his savings and retirement funds. Dude became addicted to e-trade. His goal was to put all his money into etrade and exit with 5 million after taxes in 5 years or less. Granted, this was all before the last bubble burst and he started with over 500k. But the motherfucker did it. Dude sat in front of the computer for 12+ hours a day. But he made his money and retired at 58 years old.

 

[JimJohnson]

One of the biggest class divides in this country (the world?) - or maybe one of the biggest causes of class division - is people that know what to do with money and people that do not.

Personally, I fall into the later. I got a lot of money sitting in a goddamn savings account. Soon as I get some time, I have to learn what the **** to do with it.

I watched my friend's dad quit his job (as a neurosurgeon) and liquidate all his savings and retirement funds. Dude became addicted to e-trade. His goal was to put all his money into etrade and exit with 5 million after taxes in 5 years or less. Granted, this was all before the last bubble burst and he started with over 500k. But the motherfucker did it. Dude sat in front of the computer for 12+ hours a day. But he made his money and retired at 58 years old.

A lot of doctors are addicted to trading. At one point, I thought about going to med school. I was shadowing several doctors and they each had their addictions. One doctor was addicted to biotechnology stocks and he only let me shadow him because he wanted to find out which stocks I was into.

And then I shadowed a radiologist. Guy spent about 80% of his time day trading. The other 20% he would look at people's charts.

Crazy.

 

[SERE Bear]

Jim, would you mind explaining options?

 

[JimJohnson]

Jim, would you mind explaining options?

Yea it can get pretty complicated though.

Call - The right to buy stock at a specified price by a certain date.
Put - The right to sell stock at a specified price by a certain date.

Calls and Puts are typically used as a hedge (which I will explain in a second) but can also be used for speculation.

How can call be used as a hedge?
So imagine you're long 100 shares of Google right now at $580 per share. If it goes up, you make money. If it goes down, you lose money. Simple. But what you can do is sell a call (1 call = 100 shares) to help generate some extra income. If you look at an option matrix, the August 600 strike calls are trading 6.30 bid by 6.80 ask. Since each call is equivalent to 100 shares, you need to multiply that bid/ask spread by 100 to get real dollars. So if you sell 1 600 strike call for 6.30, your trading account will be credited with $630.00.

So what's the rub? Well the risk is that Google shares trade much higher than $600. Since you sold the right to your 100 shares at $600 per share, you give up any gains over 600 and you would basically sell your 100 shares of Google on August expiration to the call owner at 600 per share. FYI, this is done automatically. So in this scenario, you own 100 shares of GOOGLE at 580 per share. It goes up above 600, you only make the difference between 580 and 600. So you make $2,000 + the $630.00 you collected by selling the call.

The ideal situation would be for Google stock to finish August expiration at $599.99. Why? Because not only do you get the $630.00 credit, your 100 shares of Google also went all the way up to $599.99 and the call that you sold expires worthless. This means you get to keep your 100 shares of stock. Great trade.

Suppose Google shares go down. Well you're going to lose obviously on your long position but the $630.00 credit that you received will still be yours. So that helps offset any potential loss from shares dropping.

True Hedge
In this same situation, suppose you're long 100 shares of Google at 580 per share but you're really worried about stock dropping long-term. Well perhaps, you want to buy a long-term put. What does a put do for you? Remember that a put gives you the right to sell stock at a certain price by a certain date. So what you could do is perhaps look out long term (January 2015 or January 2016) and but a 500 strike put. This essentially means that the most you can lose on your stock is the difference between 580 (current price) and 500 (your put strike price). Even if Google declares bankruptcy and drops to 1 penny per share, you would be protected and be able to sell your 100 shares at 500 per share. And of course, you'll also lose whatever you paid to buy the put.

What happens if Google goes higher? Well you're going to lose on your put but hopefully Google goes up by more than what you paid for the put. This ends up being a winning trade.

Risky Trades
You can also engage in what's called naked put selling. This is speculation. Let's say you don't have any position in Google but you don't think it will drop below 500 by the end of 2014. Well you could sell a December 500 strike put right now for $7.30. That's $730.00. This means that as long as Google stays above 500 by December 2014, you get to keep that $730.00. However, this can be extremely risky. If Google declares bankruptcy and drops to 1 penny per share. Well guess what? You just lost $58,000 for a potential gain of $730.00. That would really suck.

Buying Calls and Puts
A good way to speculate is just to buy calls and/or puts. If you think stock is going higher and have a good opinion about when, you can buy a call. If you think is going lower, you can buy a put. Buying options can give you a lot of leverage. This means that if you're right, you stand to gain a lot of money. Owning stock requires more margin than does buying options. So you could potentially make crazy amounts of money compared to what you deposit in the account.

You can also trades spreads, strangles, straddles. I can get into those but those are more advanced concepts.