With Prices Low, I Want to Buy--Advice Requested

[tekisui]

Next week, maybe, as the market nears what I believe will be the bottom, I am going to invest some money. I have a small amount of "extra" funds to get started.

When looking at specific stocks/funds what do I need to be aware of. I plan on investing at 30%/30%/40%. The 40% being long term, low risk funds, and the two 30% for higher risk, year to two investments that will be sold and re-invested more aggressively.

I am thinking biotech and/or energy. I would appreciate any advice or warnings that I need to be aware of. TIA.

[still_one]

1. Sell puts at the strike price you want to buy in on the companies you like

[gaspee]

6. I thought

They stopped short selling. Or was that just for the underlying and not derivatives?

The trader in me shudders at the thought of being net short contracts in this high volatility market. It would probably work though.

Worst case scenario is that volatility spikes even more and you temporarily (on paper) lose money. As long as you aren't forced to cover that on paper loss by buying back the puts, it's a pretty sound idea.

Selling juice is probably the best strategy right now. It's not for the faint of heart, though.

[still_one]

8. It is unoverd short selling. For example, lets say you are concerned the bottom isn't in

You find a stock you like, and write a put on that stock for the price you would like to buy it

You will get a premium from the buyer of your put, to sell it to you at the specified price you want to buy it

If the stock drops down to that price or below, at expiration, you will buy the stock at that price. If the stock goes above the strike price you won't get the stock, but in either case you will collect the premium

Of course if you just want to buy a stock at a price, do a limit order

What makes writing puts attractive is that you get a premium

[gaspee]

9. Uhm...

I was a floor (pit) trader on the Pacific Exchange (2nd biggest options trading floor in the country after the cboe) for ten years before it went all electronic.

I traded in the Softie (Microsoft) pit for years - from '91-98 - I would think my use of words like juice and knowing exactly how volatility affects option pricing would have given that away.

[still_one]

10. Actually I thought I was responding to the OP, and definitely not trying to be patronizing

sorry about that

I do agree with you.

91-98 were good years to be trading, my hats off to you.

At least the market was moving the right direction during those years

This is definitely the most dangerous and uncertain market I have ever experienced

One thing I don't understand is why did they change the up tick rule allowing shorting on the down tick, and how long was uncovered shorting allowed?

Twenty/thirty years ago I never heard of shorting a stock without borrowing the underlying asset

[A HERETIC I AM]

12. Writing puts is no guarantee you will be able to buy the stock.

You will get a premium from the buyer of your put, to sell it to you at the specified price you want to buy it

Not necessarily. The holder (buyer) of a Put contract has the right but not the obligation to sell or "exercise" his contract. If the issue ticks away (goes "out the money") the contract will expire worthless to the holder. Even if the issue goes in the money for the holder but not enough to cover the premium and commissions, he may not exercise and let it expire.

If the stock drops down to that price or below, at expiration, you will buy the stock at that price.

Wrong. You are forced to buy at the strike which could be way above the market value of the issue. You are now owning an issue that is declining in value, not appreciating and you have likely paid way more for it than you can sell it for.


If the stock goes above the strike price you won't get the stock, but in either case you will collect the premium.

Agreed

A Put holder wants the issue to decline in price. The writer wants it to stay the same or go up.
A Call holder wants the issue to rise in price. The writer wants it to stay the same or go down.

Do you really think suggesting the use of naked Put Writing is a sound investment strategy for the average investor? If the issue ticks well in the money (into the holders favor,) the writer is forced to purchase what could possibly be a complete dog of a stock well above its market value.

Options are not for the novice (Not suggesting tekisui is a novice, but there is really no way to know) or the inexperienced. In my opinion, making a recommendation to use such a strategy to someone who is likely a perfect stranger you know nothing about is quite frankly irresponsible.

[OffWithTheirHeads]

2. Fuck, go to Vegas and put it on Black

They don't have blue and I can't say put it on red as a matter of principle. Buy real estate. At least you can see it.

[K Gardner]

3. I started investing just this week in Biofuels, alternative energy, solar,

stem cells, generic pharm companies.. things I think will be good for the long term and under an Obama presidency.

I learned a few valuable lessons already: When you think the price is lowest, its probably not, LOL.

If I'd waited 2 days, I'd have gotten all but two of my stocks at $1.00/share less than what I paid.

Do research, believe in the companies you invest in, be prepared to hold for the long haul.

If you look at "penny stocks", be careful.

Only invest money you can AFFORD TO LOSE.

Invest, then stop looking at your portfolio. Its likely going to go down and if you obsess over it, it will make you sick. So if you believe in your company and you've done your research, ride it out, think of the future and congratulate yourself on taking the plunge :-)

[tekisui]

5. You mirrored my thinking.

I was thinking stem cells and alternative energies, specifically. I am at the big idea stage, right now. I am getting ready to research the stocks now.

What stem cell companies are out there?

[K Gardner]

7. Here's a list:

http://www.stem-cell-companies.com/Stocks/

I invested in ASTM because I like its patents and cardiac research.

STEM is working on a Hep C treatment, lots of people like it.

You just have to look into each company and see which one you like.. I'm really not looking at profit/loss right now because with the CURRENT climate, stems have been on the back burner.

[AdHocSolver]

17. The economy hasn't hit bottom yet. It is too early to tell which tech stocks will make it.

Remember the dot coms? New technology. Some did well. Most went kaput.

My recommendation is to stay "liquid". Put your money in insured accounts. You may need the cash.

Wait until after a new government takes over before investing anything. What thrives and what survives will depend on where other investors as well as where government funding goes.

If you must gamble, take the suggestion of another poster and head for Las Vegas. At this point in time, your chances there are as good as the stock market.

Just my two cents.

[K Gardner]

20. Your 2 cents makes sense. I invested a little in what I considered a "rock bottom"

price on some stocks just recently and already lost nearly 10%. I'm back on the sidelines for now :-)

[Joanne98]

4. Buy ETF's...

XLF XLE

[ozone_man]

11. Only a temporary bottom coming.

I suppose if you are a nimble trader, as in catching falling knives, you could get in and out at the right time, but if not, it's best to hold cash now. This is not a short term recession/depression coming.

[Better Believe It]

13. Don't Buy Any Stocks World Markets May Have To Be Shut-down for 1-2 weeks

The market will go down at least another 50% in the next few weeks.

You see, this is the beginning of the stock market crash, not the end.

And this is just the beginning of a prolonged and very deep world wide recession.

The panic on Wall Street hasn't reached fever pitch yet.

The will happen very soon.

[Narkos]

14. So you wouldn't recommend investing at this point at all?

[sendero]

15. Bottom fishing..

... at this point is mighty dangerous. The market is nowhere close to bottom IMHO and not only that with the actual economy in triage the markets have no reason to go up for quite some time.

[nadinbrzezinski]

16. My parents FA actually advised against buying stock at this point

(that alone surprised me)

We got a fund....

[bhikkhu]

18. Green energy...If I had any money, thats where it would be

I don't have any specific advice (except stay away from fuel cell companies - they've been dogs for years now) but particularly in solar there are some bargains now, with great future potential.

Many other things are bargains, but then probably so were horse-drawn wagon manufacturers in 1905.

[CAcyclist]

22. They still make horse-drawn wagons and they still make buggy whips nt

[hertopos]

19. ETF

Don't buy any single stock, that's too risky.

ETF is going to replace a lot of mutual funds.
They are in general more diversified and less expensive.
They are typically mirroring some sort of index.

My favorite is Cleantech index, it's ETF is
PowerShares Cleantech Portfolio Exchange Traded Fund - (Ticker: PZD)
It is traded on American Stock exchange and you can buy like buying stock.

Google ETF and learn more.

Hertopos

[CAcyclist]

21. Don't buy anything I want to buy - I seem to have the worst luck

I bought Fannie Mae at 4 then the government bought it. Ouch (didn't sell, though)
I bought Gannet at 8.69 with an 18% annual dividend - now Gannet is probably going to cut the dividend.
These are the other stocks I'm looking at that will be jinxed if I buy: WWE, Pfizer, CBS and NYT