written by reader Any thoughts on stock market today?

By hgpark888, June 20, 2013

After Bernanke’s speech about pulling stimulus off the market,
it has been quite a roller coaster, what does everyone think about that?
I have been saving up for the stimulus or some kind of event to trigger the pull back for quite some time and I think that the time has come, but I would like to wait until Monday to see how the market is doing.

Anyone thinking of shopping?

Does anyone think that maybe we should wait a bit longer until we move in?

Any insight would be greatly appreciated.

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Naquadah
Irregular
Naquadah
June 21, 2013 1:07 pm

I am buying selectively but not full positions

👍 13
qwa2
Irregular
June 21, 2013 2:28 pm

Nibbled lightly….

langrenn
Member
langrenn
June 22, 2013 4:41 pm

This market turmoil could be a good opportunity to acquire good stocks by selling puts on stocks you would like to own anyway. Chose a price that you would be happy to own shares at (even though there’s no way to know what the eventual bottom might be, but for example pick a good technical resistance point), enter a put “sell to open” order with your broker, and consider the put to be your limit order. You get to keep the proceeds from selling the put, so that income reduces the effective price of your stock even further. If the stock price drops below the strike price of the put before the expiration date, you’ve made a bargain purchase. If the stock price never gets down that far, you get to keep the income anyway.

During periods of high volatility such as now, the options become more expensive, so your income is higher than usual for selling the put. If fear and volatility subsequently decline, the price of the put will decline correspondingly, which is what will also happen if the price of the stock goes back up. In that case, if you don’t want to wait for the expiration date, you can repurchase the put for a lower price than you sold it for and put your money to work again.

Be sure to keep enough cash in your account to pay for the stock that you will acquire if the put is exercised. The downside risk to this strategy is small: basically that you might have to buy the stock at your predetermined strike price even if the stock declines further below it. But that sure beats buying the stock at a higher price and riding it down, plus you earn the income from selling the put. And you can always immediately turn around and sell the stock again at the market price if the fundamentals have changed and you don’t want to own it after all. It’s a great way to buy low in a volatile market!

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