| Topic: |
Sociology > Depression |
| User: |
"Charles" |
| Date: |
23 Jan 2006 04:51:05 PM |
| Object: |
I bought some stock |
in United Airlines, I thought that it might recover some value when
they came out of bankruptcy. I found out later that the old stock
(like mine) will be zeroed out and they will issue new stock. The
value of mine is plumeting, I don't have enough to worry about, but
what is interesting is the number of shares that are being traded.
somebody is buying a lot of stock, I can't believe there are that many
people dumber than me. Especially people with money.
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| User: "Wanda" |
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| Title: Re: I bought some stock |
23 Jan 2006 06:09:05 PM |
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"Charles" <ckraft@SPAMTRAP.west.net> wrote in message
news:q9nat1h57pl3h7l187h47vdrt03l6c1l34@4ax.com...
in United Airlines, I thought that it might recover some value when
they came out of bankruptcy. I found out later that the old stock
(like mine) will be zeroed out and they will issue new stock. The
value of mine is plumeting, I don't have enough to worry about, but
what is interesting is the number of shares that are being traded.
somebody is buying a lot of stock, I can't believe there are that many
people dumber than me. Especially people with money.
Did you purchase the stock pre or post bankruptcy?
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| User: "Charles" |
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| Title: Re: I bought some stock |
23 Jan 2006 06:20:41 PM |
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On Tue, 24 Jan 2006 00:09:05 GMT, "Wanda"
<mmmilady@NOSPAMsbcglobal.net> wrote:
"Charles" <ckraft@SPAMTRAP.west.net> wrote in message
news:q9nat1h57pl3h7l187h47vdrt03l6c1l34@4ax.com...
in United Airlines, I thought that it might recover some value when
they came out of bankruptcy. I found out later that the old stock
(like mine) will be zeroed out and they will issue new stock. The
value of mine is plumeting, I don't have enough to worry about, but
what is interesting is the number of shares that are being traded.
somebody is buying a lot of stock, I can't believe there are that many
people dumber than me. Especially people with money.
Did you purchase the stock pre or post bankruptcy?
Just a few days ago, post bankruptcy, but before the terms for coming
out of bankruptcy were announced.
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| User: "Wanda" |
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| Title: Re: I bought some stock |
23 Jan 2006 09:07:12 PM |
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"Charles" <ckraft@SPAMTRAP.west.net> wrote in message
news:4lsat113s5aescvfjbcq0h17bm12nj2d0k@4ax.com...
On Tue, 24 Jan 2006 00:09:05 GMT, "Wanda"
<mmmilady@NOSPAMsbcglobal.net> wrote:
"Charles" <ckraft@SPAMTRAP.west.net> wrote in message
news:q9nat1h57pl3h7l187h47vdrt03l6c1l34@4ax.com...
in United Airlines, I thought that it might recover some value when
they came out of bankruptcy. I found out later that the old stock
(like mine) will be zeroed out and they will issue new stock. The
value of mine is plumeting, I don't have enough to worry about, but
what is interesting is the number of shares that are being traded.
somebody is buying a lot of stock, I can't believe there are that many
people dumber than me. Especially people with money.
Did you purchase the stock pre or post bankruptcy?
Just a few days ago, post bankruptcy, but before the terms for coming
out of bankruptcy were announced.
Ah well I thought I would learn something here. But after reading the rest
of the replies, my head is spinning :-) My reason for asking is that we
purchased some Delta stock post bankruptcy. I just wondered what pattern
United stock followed.
I'll go back to selling on ebay now and leave the market to you smart guys
:-D
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| User: "Charles" |
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| Title: Re: I bought some stock |
23 Jan 2006 08:51:50 PM |
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On Tue, 24 Jan 2006 03:07:12 GMT, "Wanda"
<mmmilady@NOSPAMsbcglobal.net> wrote:
"Charles" <ckraft@SPAMTRAP.west.net> wrote in message
news:4lsat113s5aescvfjbcq0h17bm12nj2d0k@4ax.com...
On Tue, 24 Jan 2006 00:09:05 GMT, "Wanda"
<mmmilady@NOSPAMsbcglobal.net> wrote:
"Charles" <ckraft@SPAMTRAP.west.net> wrote in message
news:q9nat1h57pl3h7l187h47vdrt03l6c1l34@4ax.com...
in United Airlines, I thought that it might recover some value when
they came out of bankruptcy. I found out later that the old stock
(like mine) will be zeroed out and they will issue new stock. The
value of mine is plumeting, I don't have enough to worry about, but
what is interesting is the number of shares that are being traded.
somebody is buying a lot of stock, I can't believe there are that many
people dumber than me. Especially people with money.
Did you purchase the stock pre or post bankruptcy?
Just a few days ago, post bankruptcy, but before the terms for coming
out of bankruptcy were announced.
Ah well I thought I would learn something here. But after reading the rest
of the replies, my head is spinning :-) My reason for asking is that we
purchased some Delta stock post bankruptcy. I just wondered what pattern
United stock followed.
I'll go back to selling on ebay now and leave the market to you smart guys
:-D
You learned not to look to me for advice, that's a good lesson. <:-)
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| User: "CyberDroog" |
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| Title: Re: I bought some stock |
24 Jan 2006 02:26:31 AM |
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On Tue, 24 Jan 2006 03:07:12 GMT, "Wanda" <mmmilady@NOSPAMsbcglobal.net>
wrote:
Ah well I thought I would learn something here. But after reading the rest
of the replies, my head is spinning :-) My reason for asking is that we
purchased some Delta stock post bankruptcy. I just wondered what pattern
United stock followed.
It isn't really difficult. You just have to define which stock you bought.
Oddly enough, cancelled stocks can still be trading years after they have
become worthless.
--
People are more violently opposed to fur than leather because it's safer to
harass rich women than motorcycle gangs.
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| User: "Bacon" |
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| Title: Re: I bought some stock |
23 Jan 2006 06:32:53 PM |
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Charles wrote:
in United Airlines, I thought that it might recover some value when
they came out of bankruptcy. I found out later that the old stock
(like mine) will be zeroed out and they will issue new stock. The
value of mine is plumeting, I don't have enough to worry about, but
what is interesting is the number of shares that are being traded.
somebody is buying a lot of stock, I can't believe there are that many
people dumber than me. Especially people with money.
Some analysts think United has positioned itself to be part of a of
merger or consolidation since they've eliminated so much cost. Since
U.S. Airways and America West merged last year their share price has
almost doubled. Other analysts think they're cost structure is still
too bloated to be considered a merger target. So, even though their
stock price has been plummeting, it's pure speculation to predict where
it will go from here. I hadn't heard they were terminating their
existing shares, however you will get new shares in proportion to your
existing ownership in the company, even if they are virtually
worthless. I see they are trading at $0.27 today, what did you
purchase your shares at.
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| User: "Charles" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:06:18 PM |
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On 23 Jan 2006 16:32:53 -0800, "Bacon" <rbkfour@yahoo.com> wrote:
Charles wrote:
in United Airlines, I thought that it might recover some value when
they came out of bankruptcy. I found out later that the old stock
(like mine) will be zeroed out and they will issue new stock. The
value of mine is plumeting, I don't have enough to worry about, but
what is interesting is the number of shares that are being traded.
somebody is buying a lot of stock, I can't believe there are that many
people dumber than me. Especially people with money.
Some analysts think United has positioned itself to be part of a of
merger or consolidation since they've eliminated so much cost. Since
U.S. Airways and America West merged last year their share price has
almost doubled. Other analysts think they're cost structure is still
too bloated to be considered a merger target. So, even though their
stock price has been plummeting, it's pure speculation to predict where
it will go from here. I hadn't heard they were terminating their
existing shares, however you will get new shares in proportion to your
existing ownership in the company, even if they are virtually
worthless. I see they are trading at $0.27 today, what did you
purchase your shares at.
I paid 92 cents. I don't stand to lose much, and it has been the most
interesting thing I've done lately. boring life, anyone?
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| User: "Franz Bestuchev" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:25:18 PM |
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Charles wrote:
in United Airlines, I thought that it might recover some value when
they came out of bankruptcy. I found out later that the old stock
(like mine) will be zeroed out and they will issue new stock. The
value of mine is plumeting, I don't have enough to worry about, but
what is interesting is the number of shares that are being traded.
somebody is buying a lot of stock, I can't believe there are that many
people dumber than me. Especially people with money.
You can also make money on a stock that's going down in value.
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| User: "Bacon" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:30:54 PM |
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Franz Bestuchev wrote:
You can also make money on a stock that's going down in value.
I love that concept. You "borrow" shares from a broker for a nominal
fee and immediately sell them in the public market. The price goes
down, you repurchase the shares at the lower price and return them to
the broker and you pocket the gain, er loss...whatever.
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| User: "Franz Bestuchev" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:42:29 PM |
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Bacon wrote:
Franz Bestuchev wrote:
You can also make money on a stock that's going down in value.
I love that concept. You "borrow" shares from a broker for a nominal
fee and immediately sell them in the public market. The price goes
down, you repurchase the shares at the lower price and return them to
the broker and you pocket the gain, er loss...whatever.
I've tried explaining the concept of "buy high, sell low" to a lot of
people. It never seems to register.
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| User: "Charles" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:46:45 PM |
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On Mon, 23 Jan 2006 18:42:29 -0700, Franz Bestuchev
<franz.bestuchev@gmail.com> wrote:
Bacon wrote:
Franz Bestuchev wrote:
You can also make money on a stock that's going down in value.
I love that concept. You "borrow" shares from a broker for a nominal
fee and immediately sell them in the public market. The price goes
down, you repurchase the shares at the lower price and return them to
the broker and you pocket the gain, er loss...whatever.
I've tried explaining the concept of "buy high, sell low" to a lot of
people. It never seems to register.
If people didn't do that how would us shysters get ahead? Um, I mean
investors, you know I meant that, right?
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| User: "CyberDroog" |
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| Title: Re: I bought some stock |
24 Jan 2006 01:46:21 AM |
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On Mon, 23 Jan 2006 18:42:29 -0700, Franz Bestuchev
<franz.bestuchev@gmail.com> wrote:
I've tried explaining the concept of "buy high, sell low" to a lot of
people. It never seems to register.
I use the Cabbage Patch doll craze as an example to explain it to people.
When Cabbage Patch dolls were selling for more than the price of gold, you
borrow 100 dolls from someone who is just sitting on them, with a promise
to return 100 dolls later on. You then sell the dolls for the premium
price. Once the craze is over, you buy 100 dolls at the normal retail
price and return them to the person from whom you borrowed them.
You sold the dolls for, say, $1000 each giving you $100,000 in cash. You
then buy the dolls for $20 each, costing you $20,000. That leaves you
$80,000 in profit.
--
The hand of God may well be all around us, but it is not, nor can it be,
the task of science to dust for fingerprints.
- Robert Dorit
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| User: "Charles" |
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| Title: Re: I bought some stock |
24 Jan 2006 02:00:07 AM |
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On Tue, 24 Jan 2006 07:46:21 GMT, CyberDroog
<CyberDroog@ClockworkOrange.com> wrote:
On Mon, 23 Jan 2006 18:42:29 -0700, Franz Bestuchev
<franz.bestuchev@gmail.com> wrote:
I've tried explaining the concept of "buy high, sell low" to a lot of
people. It never seems to register.
I use the Cabbage Patch doll craze as an example to explain it to people.
When Cabbage Patch dolls were selling for more than the price of gold, you
borrow 100 dolls from someone who is just sitting on them, with a promise
to return 100 dolls later on. You then sell the dolls for the premium
price. Once the craze is over, you buy 100 dolls at the normal retail
price and return them to the person from whom you borrowed them.
You sold the dolls for, say, $1000 each giving you $100,000 in cash. You
then buy the dolls for $20 each, costing you $20,000. That leaves you
$80,000 in profit.
that's just short selling, that part I understand, at least well
enough to stay away from it.
I understand the greater fool theory also, I just find it hard to
believe that there are so many.
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| User: "CyberDroog" |
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| Title: Re: I bought some stock |
24 Jan 2006 03:28:01 AM |
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On Tue, 24 Jan 2006 08:00:07 GMT, Charles <ckraft@SPAMTRAP.west.net> wrote:
On Tue, 24 Jan 2006 07:46:21 GMT, CyberDroog
<CyberDroog@ClockworkOrange.com> wrote:
You sold the dolls for, say, $1000 each giving you $100,000 in cash. You
then buy the dolls for $20 each, costing you $20,000. That leaves you
$80,000 in profit.
that's just short selling, that part I understand, at least well
enough to stay away from it.
I understand the greater fool theory also, I just find it hard to
believe that there are so many.
I messed up the math... heh. That's $2000 cost, leading to a $98,000
profit.
--
At the core of liberalism is the spoiled child - miserable, as all spoiled
children are, unsatisfied, demanding, ill-disciplined, despotic and
useless. Liberalism is a philosphy of sniveling brats.
- P.J. O'Rourke
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| User: "Charles" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:36:37 PM |
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On 23 Jan 2006 17:30:54 -0800, "Bacon" <rbkfour@yahoo.com> wrote:
Franz Bestuchev wrote:
You can also make money on a stock that's going down in value.
I love that concept. You "borrow" shares from a broker for a nominal
fee and immediately sell them in the public market. The price goes
down, you repurchase the shares at the lower price and return them to
the broker and you pocket the gain, er loss...whatever.
The brokers don't usually go broke, tho. The fees and commissions
would wipe out any gains I might make at the level of risk I am
willing to take. Betting against the house is usually not a good
idea.
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| User: "Charles" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:32:25 PM |
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On Mon, 23 Jan 2006 18:25:18 -0700, Franz Bestuchev
<franz.bestuchev@gmail.com> wrote:
Charles wrote:
in United Airlines, I thought that it might recover some value when
they came out of bankruptcy. I found out later that the old stock
(like mine) will be zeroed out and they will issue new stock. The
value of mine is plumeting, I don't have enough to worry about, but
what is interesting is the number of shares that are being traded.
somebody is buying a lot of stock, I can't believe there are that many
people dumber than me. Especially people with money.
You can also make money on a stock that's going down in value.
Options scare me a bit, I like the idea of a limited downside. I just
wonder who is buying all the stock that is being traded.
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| User: "Bacon" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:38:55 PM |
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Charles wrote:
Options scare me a bit, I like the idea of a limited downside. I just
wonder who is buying all the stock that is being traded.
Actually, it is through options that your downside is limited (the most
you stand to lose is the option price). By buying the shares outright,
you are fully exposed to the possibility of losing 100% of your
investment. Options are tricky, though. I've known people who
actively trade them and it takes over their lives...kinda like ASD.
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| User: "Franz Bestuchev" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:44:13 PM |
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Bacon wrote:
Charles wrote:
Options scare me a bit, I like the idea of a limited downside. I just
wonder who is buying all the stock that is being traded.
Actually, it is through options that your downside is limited (the most
you stand to lose is the option price). By buying the shares outright,
you are fully exposed to the possibility of losing 100% of your
investment. Options are tricky, though. I've known people who
actively trade them and it takes over their lives...kinda like ASD.
Options traders are like crack junkies hooked on Vegas.
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| User: "Charles" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:45:04 PM |
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On 23 Jan 2006 17:38:55 -0800, "Bacon" <rbkfour@yahoo.com> wrote:
Charles wrote:
Options scare me a bit, I like the idea of a limited downside. I just
wonder who is buying all the stock that is being traded.
Actually, it is through options that your downside is limited (the most
you stand to lose is the option price). By buying the shares outright,
you are fully exposed to the possibility of losing 100% of your
investment. Options are tricky, though. I've known people who
actively trade them and it takes over their lives...kinda like ASD.
I must not understand options right, then.
If I short some stock that is valued at a dollar, and the next day it
goes to ten dollars, don't I have to buy the stock to replace what I
borrowed?
I wonder if we can short ASD.
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| User: "Bacon" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:53:46 PM |
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Charles wrote:
I must not understand options right, then.
If I short some stock that is valued at a dollar, and the next day it
goes to ten dollars, don't I have to buy the stock to replace what I
borrowed?
I wonder if we can short ASD.
Oh, I guess you're right that your downside is unlimited when shorting
stock, never thought of it like that. I was thinking of the
traditional buy low/sell high scenario. I guess you could sell short
and buy an option to purchase at a set price in case it
skyrockets...they should teach courses on this stuff.
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| User: "Charles" |
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| Title: Re: I bought some stock |
23 Jan 2006 07:58:51 PM |
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On 23 Jan 2006 17:53:46 -0800, "Bacon" <rbkfour@yahoo.com> wrote:
Charles wrote:
I must not understand options right, then.
If I short some stock that is valued at a dollar, and the next day it
goes to ten dollars, don't I have to buy the stock to replace what I
borrowed?
I wonder if we can short ASD.
Oh, I guess you're right that your downside is unlimited when shorting
stock, never thought of it like that. I was thinking of the
traditional buy low/sell high scenario. I guess you could sell short
and buy an option to purchase at a set price in case it
skyrockets...they should teach courses on this stuff.
buy low, sell high. That sounds good. I wonder if we can pattent
that. <:-)
Buying on margin is another way to make lots of money, or go broke.
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| User: "CyberDroog" |
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| Title: Re: I bought some stock |
24 Jan 2006 02:24:24 AM |
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On 23 Jan 2006 17:53:46 -0800, "Bacon" <rbkfour@yahoo.com> wrote:
Oh, I guess you're right that your downside is unlimited when shorting
stock, never thought of it like that. I was thinking of the
traditional buy low/sell high scenario. I guess you could sell short
and buy an option to purchase at a set price in case it
skyrockets...they should teach courses on this stuff.
They do. In fact teaching courses on stock trading is, in many ways, much
more profitable than trading stocks. The people you pay to teach you make
a lot of money, and generally you will do no better trading.
The fact is that if the teacher's really knew how to make millions trading
stocks, they'd be out there doing it.
--
CONTROVERSY, n. A battle in which spittle or ink replaces the injurious
cannonball and the inconsiderate bayonet.
- Ambrose Bierce
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| User: "CyberDroog" |
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| Title: Re: I bought some stock |
24 Jan 2006 02:20:57 AM |
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On Tue, 24 Jan 2006 01:45:04 GMT, Charles <ckraft@SPAMTRAP.west.net> wrote:
I must not understand options right, then.
If I short some stock that is valued at a dollar, and the next day it
goes to ten dollars, don't I have to buy the stock to replace what I
borrowed?
Yes, eventually. Of course your example would result in a $9000 deficit in
your account, and you would have gotten a margin call long before that. But
that is the basic idea.
With options you are limited. Depending on whether you buy a put or a
call, what you have is the option to either sell or buy 100 shares of
stock. The option is voluntary on your part. While the option is in play,
you can, at any time, exercise a put and sell the stock, or exercise a call
and buy the stock. But you don't have to, and if you just wait for the
option to expire, all you lose is the cost of the option.
Just to clarify... Say a stock is at $30 and you buy an option at $1. An
option contract is 100 shares of stock. So you pay $100 for one option
contract. Buying 100 shares of the stock outright would have cost you
$3000. But for only $100 the option allows you to take part in the fate of
those shares with no further downside. The most you can lose is the $100
you paid for the option.
If you short a stock, because you expect the price to go down, you are on
the hook for returning the stock. To do the same thing with an option, you
would buy a put (that is, you buy the option to sell 100 shares at a
specified price, called the strike price.) If the price of the stock goes
up, you just let the option expire and you lose only the purchase price of
the option.
If the stock plummets, you exercise the option and receive the difference
between the strike price of the option (high) and the current price (low).
That is actually all you see happen. What happens behind the scenes,
essentially, is that the person who sold the option has to buy the stock at
the high price even though the current price is low. Those transactions
just happen on paper, so all you see is that you made a profit (and the
option writer sees that he just got boned.)
Note, selling an option means selling an option contract that you own. In
other words, instead of exercising an option, you can just sell it to
someone else. The prices of options rise and fall just like stocks.
The real downside to options is if you write them. That is if you create
the option contract initially. The writer of the option *is* obligated to
either buy or sell a stock.
--
JEALOUS, adj. Unduly concerned about the preservation of that which can
be lost only if not worth keeping.
- Ambrose Bierce
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| User: "Charles" |
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| Title: Re: I bought some stock |
24 Jan 2006 02:29:17 AM |
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On Tue, 24 Jan 2006 08:20:57 GMT, CyberDroog
<CyberDroog@ClockworkOrange.com> wrote:
On Tue, 24 Jan 2006 01:45:04 GMT, Charles <ckraft@SPAMTRAP.west.net> wrote:
I must not understand options right, then.
If I short some stock that is valued at a dollar, and the next day it
goes to ten dollars, don't I have to buy the stock to replace what I
borrowed?
Yes, eventually. Of course your example would result in a $9000 deficit in
your account, and you would have gotten a margin call long before that. But
that is the basic idea.
With options you are limited. Depending on whether you buy a put or a
call, what you have is the option to either sell or buy 100 shares of
stock. The option is voluntary on your part. While the option is in play,
you can, at any time, exercise a put and sell the stock, or exercise a call
and buy the stock. But you don't have to, and if you just wait for the
option to expire, all you lose is the cost of the option.
Just to clarify... Say a stock is at $30 and you buy an option at $1. An
option contract is 100 shares of stock. So you pay $100 for one option
contract. Buying 100 shares of the stock outright would have cost you
$3000. But for only $100 the option allows you to take part in the fate of
those shares with no further downside. The most you can lose is the $100
you paid for the option.
If you short a stock, because you expect the price to go down, you are on
the hook for returning the stock. To do the same thing with an option, you
would buy a put (that is, you buy the option to sell 100 shares at a
specified price, called the strike price.) If the price of the stock goes
up, you just let the option expire and you lose only the purchase price of
the option.
If the stock plummets, you exercise the option and receive the difference
between the strike price of the option (high) and the current price (low).
That is actually all you see happen. What happens behind the scenes,
essentially, is that the person who sold the option has to buy the stock at
the high price even though the current price is low. Those transactions
just happen on paper, so all you see is that you made a profit (and the
option writer sees that he just got boned.)
Note, selling an option means selling an option contract that you own. In
other words, instead of exercising an option, you can just sell it to
someone else. The prices of options rise and fall just like stocks.
The real downside to options is if you write them. That is if you create
the option contract initially. The writer of the option *is* obligated to
either buy or sell a stock.
I misused the term "options." I meant to refer to short selling only.
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| User: "CyberDroog" |
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| Title: Re: I bought some stock |
24 Jan 2006 01:34:38 AM |
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On Mon, 23 Jan 2006 22:51:05 GMT, Charles <ckraft@SPAMTRAP.west.net> wrote:
in United Airlines, I thought that it might recover some value when
they came out of bankruptcy. I found out later that the old stock
(like mine) will be zeroed out and they will issue new stock. The
value of mine is plumeting, I don't have enough to worry about, but
what is interesting is the number of shares that are being traded.
somebody is buying a lot of stock, I can't believe there are that many
people dumber than me. Especially people with money.
Important lesson. A companies stock is almost always cancelled in a
bankruptcy. Creditors and perhaps bond holders get the bulk of the cash
(that is if the officers of the company haven't already taken it all...)
The reason the volatility goes sky high isn't because the people with money
are dumb. They are actually very smart, and have a gambling streak. They
gamble on the activity of those who don't know any better than to buy the
stock of a company in bankruptcy.
If you look at the charts of companies in bankruptcy, you'll see that after
the initial huge decline, they often pop up wildly several times. The
smart gamblers will buy large blocks of shares, wait for a small pop, and
then dump them quickly to people who don't know that the stock will be
cancelled.
Since the volume can go sky high, grabbing a block of 100,000 shares for
pennies, and selling them for 2, 3, or 4 times that amount is really quite
easy.
An alternative, for brokerage firms and the insiders who have direct
backing from a brokerage, is to wait for the pop and then short large
blocks of shares (i.e. sell shares they don't own.) It's a no-lose
position if the bankruptcy goes through and the stock is cancelled since
they never have to return the borrowed shares.
In other words, chances are good that the shares you bought were sold to
you by a brokerage who borrowed the shares.
--
BIGOT, n. One who is obstinately and zealously attached to an opinion
that you do not entertain.
- Ambrose Bierce
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| User: "Charles" |
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| Title: Re: I bought some stock |
24 Jan 2006 01:55:57 AM |
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On Tue, 24 Jan 2006 07:34:38 GMT, CyberDroog
<CyberDroog@ClockworkOrange.com> wrote:
On Mon, 23 Jan 2006 22:51:05 GMT, Charles <ckraft@SPAMTRAP.west.net> wrote:
in United Airlines, I thought that it might recover some value when
they came out of bankruptcy. I found out later that the old stock
(like mine) will be zeroed out and they will issue new stock. The
value of mine is plumeting, I don't have enough to worry about, but
what is interesting is the number of shares that are being traded.
somebody is buying a lot of stock, I can't believe there are that many
people dumber than me. Especially people with money.
Important lesson. A companies stock is almost always cancelled in a
bankruptcy. Creditors and perhaps bond holders get the bulk of the cash
(that is if the officers of the company haven't already taken it all...)
The reason the volatility goes sky high isn't because the people with money
are dumb. They are actually very smart, and have a gambling streak. They
gamble on the activity of those who don't know any better than to buy the
stock of a company in bankruptcy.
If you look at the charts of companies in bankruptcy, you'll see that after
the initial huge decline, they often pop up wildly several times. The
smart gamblers will buy large blocks of shares, wait for a small pop, and
then dump them quickly to people who don't know that the stock will be
cancelled.
Since the volume can go sky high, grabbing a block of 100,000 shares for
pennies, and selling them for 2, 3, or 4 times that amount is really quite
easy.
An alternative, for brokerage firms and the insiders who have direct
backing from a brokerage, is to wait for the pop and then short large
blocks of shares (i.e. sell shares they don't own.) It's a no-lose
position if the bankruptcy goes through and the stock is cancelled since
they never have to return the borrowed shares.
In other words, chances are good that the shares you bought were sold to
you by a brokerage who borrowed the shares.
That could well be, and I could lose what I paid, not too big of a
problem for this time. The average trade for UALAQ is about 330,000
shares per day, if I read the sites right, The trades the last few
days has been in the tens of millions of shares. I find it hard to
believe that that many people out there, dumb like me.
47 million shares traded today. It may well be big traders playing
against each other to see who gets out last, kind of interesting.
won't be the first dumb thing I've done, just the cost of
entertainment.
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