The Active Stock Market Trader, or Traders of Other (Crypto ect.) Market's Thing's Thread.

Discussion in 'Opinions & Current Events' started by Chrunch Houston, Mar 27, 2020.

  1. Chrunch Houston

    Chrunch Houston Premium

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    I recently (unfortunately) invested in the stock market in the form of a Roth IRA just before all this crap happened*.

    This thread is for discussing market strategies and moving forward.

    *the great pandemic of 2020
     
    Last edited: Mar 27, 2020
  2. Chrunch Houston

    Chrunch Houston Premium

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    I just put in a big order to buy 'USO' oil ETFs for market price. It is selling at $4.83, but before this mess started, and the Russians started fighting with the KSA, it was way more than double this price. Before all of this crap it was putzing around at about $12.

    I have faith that things will come back. :)
     
  3. Submerged

    Submerged Premium

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    For me with Stock Markets, so long you have a 5 to 15 year investments (not short term at all) then the percentage increase is generally going to outstrip the actual saving accounts provided by the banks.

    Just depends when you want to cash the shares out and whether its right for you at that time. Additionally you always have to remember it from when you first brought the shares at, not what the share prices are every day.

    Unless of course, the company goes out of business.
     
  4. Chrunch Houston

    Chrunch Houston Premium

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    My USO ETF is up 31%!

    I ended up buying it at $4.51. Today it closed at $5.90!

    Oil went up to $27 a barrel today. It is normally around $60. This fund still has lots of growth potential.
     
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  5. ItsAllAboutWins

    ItsAllAboutWins

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    I'm into options. I'm buying a Call option for $8 strike with a May 15th expiration date.. it just did a pull back, so we will hopefully see some consolidation then another run up.
     
  6. Chrunch Houston

    Chrunch Houston Premium

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    I really have no idea what you're talking about. :lol: Where does the $8 come into play?

    I have heard about options, don't know what they are exactly. I really need to educate myself more.

    That is kind of why I made this thread.

    btw I grew up in the south end of Louisville.
     
    Last edited: Apr 6, 2020
  7. ItsAllAboutWins

    ItsAllAboutWins

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    I'm sorry to hear that. :p


    Options is a contract for the right to buy 100 shares of a stock at a certain price. The price is in cents, but you multiply by 100. So, if a contract shows 0.10 then you would really be paying $10.
    The strike price is the price the contract is good for. So itd be like this:

    USO $8 Strike Call 0.30 - May 15th

    What this means is, I pay $30 per contract.. my max loss is $30. The contract expires on May 15th. The closer USO gets to $8 the more the contract is worth. Then, if its over $8 it's called 'in the money.' It doesn't have to get to $8, just go towards it.
     
  8. Chrunch Houston

    Chrunch Houston Premium

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    Thanks for that explanation. I trade on the Fidelity platform. I checked out the options trading part today. Still a little confused, I'll look for some youtube videos.

    USO lost a bit today.
     
  9. ryzno

    ryzno Premium

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    Sounds like short selling. Please correct me if I'm wrong.
     
  10. ItsAllAboutWins

    ItsAllAboutWins

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    Pretty much.
     
  11. Crash

    Crash Premium

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    An option in it's simplest form is a contract that provides the right (but not the obligation) to buy or sell an asset (often a stock or an ETF) at a specific, agreed upon price within a certain time period. That specific agreed upon price is called the "strike" price, and that time period is marked by an "expiration" date. When the options buyer buys or sells the underlying asset per the options contract terms, it's called "exercising" the option.

    A contract that provides the right to buy an asset is a call option. A contract that provides the right to sell an asset is a put option. For the right, but not the obligation, to exercise the option, the buyer of the option pays a fee to the option seller (fee is called "premium"). Each contract represents a right to buy/sell 100 shares of the underlying asset, so someone would need to multiply the shown premium by 100 for the cost of the contract.

    Every contract has two parties, so you can buy or sell both a call option or a put option, leading to 4 basic option actions (buy call, sell call, buy put, sell put).

    In short, to profit:

    Call buyer wants the asset price to rise
    Call seller wants the asset price to drop
    Put buyer wants the asset price to drop
    Put seller wants the asset price to rise

    Example 1 (Call): Say you bought a call for a stock with a strike price of $10/share for a premium of $1, if the price of the stock rises to $15/share in the market during the time period, you have the right to buy the stock from the option seller for $10, meaning you have a $15-$10=$5 profit/share. Since each contract represents 100 shares, your profit is $5/share*100 shares = $500. Keep in mind you paid a premium to the seller to buy the call contract in the first place, so the initial cost is $1 * 100 shares = $100. Your total profit would be $500-$100 = $400 in this case. The greater the increase in stock price, the greater the profit for the call buyer.

    If you bought a call, and the stock price doesn't go up to the strike price by call expiration, the call is "out-of-money" and will expire worthless.

    So here, if you're the call buyer, when price of stock goes up, you may profit. If you're the call seller, when price of stock goes up, you lose money.

    Example 2 (Put): Say you bought a put for a stock with a strike price of $20/share for a premium of $2. If the price of the stock decreases to $16/share in the market during the time period, you have the right to sell the stock to the option seller for $20. But market only values the stock at $16/share, so you have $20-$16=$4 profit/share. Once again, each contract represents 100 shares, so your profit is $4/share * 100 shares = $400. Keep in mind you paid a premium to the seller to buy the put contract, so the initial cost is $2 * 100 shares = $200. Your total profit would be $400-$200 = $200 in this case. The greater the decrease in stock price, the greater the profit for the put buyer.

    If you bought the put, and the stock price doesn't go down to strike price by put expiration, the put is "out-of-money" and will expire worthless.

    So here, if you're the put buyer, when price of stock goes down, you may profit. If you're the put seller, when price of stock goes down, you lose money.


    Premium is determined by a bunch of different market parameters, so the premium itself will change for the same call/put option over time.

    --
    Short selling is often used to describe betting on the market going down in general, but it technically only specifically refers to the action of selling an option, doesn't matter whether someone is selling a call (bearish, wants to see the market go down) or selling a put (bullish, wants to see the market go up). See above examples.
     
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  12. Chrunch Houston

    Chrunch Houston Premium

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    Thanks @Crash. I will have to read that three or four more times. Very informative.
     
  13. Danoff

    Danoff Premium

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    Time to sell? The stock market has bounced (thanks to some manipulation and Bernie's exit), and things don't look so bad. Is that because Coronavirus pain is starting to get into the rear view mirror, or are we poised for another big drop?

    I'm getting itchy on the sell trigger.
     
  14. ItsAllAboutWins

    ItsAllAboutWins

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    It's hard to tell. We could have had a bull trap week and next week be in the red. I would wait and see what the pre market is doing and go from there
     
  15. Crash

    Crash Premium

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    I would think that this is the time to sell in almost any other time considering the overall situation, but it's really hard to bet against Jerome Powell and the Fed's unlimited printing machine going brrrrrr and buying everything in sight. When the Fed is buying junk bonds and publicly announcing that they will do whatever it takes to "support the market", it's hard to say that the market won't continue going up.
     
  16. Dotini

    Dotini Premium

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    Sell, yes. But then what? The stock market has "bounced back" some, but it's starting to look like the economy is gutted for years to come. The combination of a long pandemic with massive unemployment, loss of GDP, increase of debt, loss of freedom, mobility and enterprise means we are royally screwed, maybe forever. Russia and Saudi Arabia have seen fit to ignite an oil war which has stopped the US oil industry dead in its tracks. We are under attack on all fronts. All paths ahead are mined with unanticipated hazards.
     
  17. Danoff

    Danoff Premium

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    [​IMG]

    Stocks are stupid. It's just hard to find anything less stupid.
     
  18. Biggles

    Biggles

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    It's pretty hard to make any sense out of what's going on. The Fed has pumped so much money into the system that it dwarfs what happened during the 2008 financial crisis, so the distortion of the true economic fundamentals is unprecedented in modern US history. Economic commentators are split on whether it's all a prelude to another big downturn in the markets as reality sets in ... or all is set for a return to pre-coronavirus market levels sparked by government stimulus. I find it impossible to believe the latter ... but what do I know?

    My business is done. I don't expect to have any revenue at all until social distancing & lock-down measures are lifted & even then I suspect it will take a long time, if ever, before things return to the way they were. I would think many, many small businesses will be in a similar position & many of them will simply fold. Some local examples: my small town normally sees 3.5 million tourists each year. The stores (other than the pharmacies & supermarket), hotels & restaurants are locked down. The theatres, along with the actors & supporting staff are closed. The vineyard outlets are shut down. The large agricultural businesses - grape-growing for the vineyards, fruit & vegetables, nurseries, outdoors & in huge industrial-size greenhouses - are all entirely dependent on the importation of migrant labour, which has been cut-off.
     
  19. Eunos_Cosmo

    Eunos_Cosmo

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    It's hard to see the recent uptick as anything other than a bull trap. There's fairly wide consensus that stocks were overpriced before Covid struck. How can they possibly me marching back to where they were in the middle of a large economic contraction with millions of people claiming unemployment, and that's before the full economic effects of the pandemic are felt? There is a tacit acceptance of the ludicrousness of the stock market I think, but as long as enough people are irrational together, then I guess it can keep trudging forth? Wild. The stock market represents some kind of collective, subconscious, nihilist-cynicism on the part of humanity. I almost wish it didn't exist.
     
  20. Danoff

    Danoff Premium

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    The fed pumped a ton of worthless paper into the market. As a result, people have rightfully run from worthless money to worthless stock... which will ultimately tank back to worthless money. It's not a good situation. My goal is to be in worthless money while everyone else is in worthless stock, and then be into something more valuable (like real estate) after that crashes.
     
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  21. Eunos_Cosmo

    Eunos_Cosmo

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    That's basically how I've positioned myself as well. Real estate is the only thing that seems like a genuine, robust, investment these days...too bad the fed has helped inflate real estate beyond all reason with progressively more unrealistic-low-interest rates for the last 40 years, pushing housing prices further and further away from median income. The crisis that is about to unfold has been in the making since Greenspan started easy money.

    Edit, To elaborate: We're addicted to easy money though. Every time the fed has tried to raise it, almost immediately the economy has crashed! (grey bars indicate recession, blue line indicates federal funds rate)
    [​IMG]
    And on the tail end of each of those subsequent crashes, the interest rate had to drop lower (press that gas pedal just a little harder) than it was before to keep the engine chugging along. We've run out of gas! It's done. The juicing has run its course.

    I've read that this all coincides with globalism and its resultant constant deflationary pressure. Economic sectors have, for the last 40 years, been able to keep finding cheaper ways to do things either with automation or developing country labor. With such downward pressure on prices, median wages either fall or remain stagnant, and economic activity generally slides too. So the fed has to keep pumping the system to get it moving. Perversely, as median wages have remained static, the increasingly cheap borrowing (combined with supply-side factors - nimbyism, onerous zoning, environmental controls, running out of convenient suburb land, poor urban planning) has meant that people are borrowing more and more ridiculous amounts of money to bid against a not-growing inventory of cheaply-built housing. To compound THAT, because interest rates are almost nothing, and because the stock market is so volatile, the only thing worth spending money on is real estate, which exacerbates the problem even further! As Lahey might say, We’re sailing into a **** typhoon Randy. We’d better haul in the jib before it gets covered in ****.

    UGH.
     
    Last edited: Apr 17, 2020
  22. Danoff

    Danoff Premium

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    This is why I like property so much. Even if the value of property goes to crap, you still have the property itself. It's still worth something because it has intrinsic utility. Not so for even something like gold. Even though it's unlikely that gold would suddenly become worthless, it could be worth quite a bit less. Salt used to be worth a lot too... And if gold is worth nothing, what are you doing with it? You can't eat it. You can't wear it...

    From that perspective, something like a Rolex might be more worthwhile.

    Full disclosure, I've made a few grand on gold recently.

    Stock has some inherent worth. If it gets low enough, companies get bought in hostile takeovers. Also, if a company shares its profits among its stockholders, and the stock price is super low, the effective dividend could be 1000%. That would make the stock price shoot up. It's not completely useless. But it's not a particularly stable thing to own since it's only useful at the very edge of stock value.

    Full disclosure, I've dumped some stock recently (buy high sell low... wait), and I'm looking for the right opportunity to dump a lot more.

    Housing is super useful. Like really really useful. And it can generate revenue (unless rent forgiveness takes over in a pandemic). And it has some scarcity, especially in certain locations. That makes it a great buy... unless you're in a bubble... which we might be in still. That being said, I don't see a lot of downward pressure on house prices. I know that keeps getting forecast, but there aren't fewer people looking for housing, there's not a ton being built at any one time, and money is just getting worth less and less. That being said, any specific location could tank. For example, if oil industry tanks, and housing is pumped up due to value in oil, the housing could tank because the oil tanked.

    The wonderful thing about housing is debt. I have a buddy who keeps trying to pay off his house as fast as he can. Which is almost ludicrous in my eyes right now. You can get a 30 year loan today in the low 3% range. And it's tax deductible (if you borrow enough). Meaning that maybe it's more like 2% after taxes, or 2.5%. Inflation runs along at 2.5%. Meaning the loan pays itself!! Literally it's free.

    And if the value of money is going down, not only is your loan shrinking, but the house price is maintaining its value (as they did in the 70s). This is a win win win for homeowners. You get to borrow for free, pay it back later with worthless paper, and keep the house which is going up in value. And it's useful. You can like... live in it. That's got utility even if it has no tradeable value to anyone else.

    Renting out housing sucks because meth contamination can ruin you. But that's another story.

    I also love cars for this reason. Even though cars are not protected against market downturns, since buyers have less in their brokerage accounts from which to pull to pay for fancy cars. But cars still have intrinsic value. It's a little more risky than housing, nobody is proposing laws to ban housing (unlike cars), and new cars are being produced quickly. But cars can still retain and gain value nicely over time.

    In terms of property, there's also artwork. But artwork is so unique that you don't know what it's worth, and it's easy to destroy. It also has limited utility. When I was in china I was shown a lot of jade and bone carvings that obviously took gazillions of hours to create. And no doubt they could be resold. But it's tough to know exactly what it is worth, and how much will 3D printing come along and replace it. Similar statements can be made about paintings.

    Bottom line, storing wealth is hard.
     
  23. Eunos_Cosmo

    Eunos_Cosmo

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    I think we've talked about it before, but just land is such a solid investment I don't think anything comes close in terms of stability. Barring very extreme circumstances (such as coastal property that either succumbs to sea level rise, or is victim of a landslide) it's basically invincible. It's less the physical manifestation of the land that you own (though that is where the utility is, obviously) but the abstract, surveyed coordinates that can't realistically be stolen, destroyed, removed, etc. You don't need to insure it. You don't need to maintain it. It's basically an instruction set that lays out a space in the physical world that is yours. It's brilliant. My fall back plan (in case I'm not able to buy a property with a house in the window between crash and inflation) is to basically sink my money into land. Probably in Texas or maybe somewhere near the great lakes (most amount of freshwater on earth...no routine natural disasters, etc) which should at least remain stable. It won't appreciate like a property with a structure on it, but it shouldn't fall behind inflation either.
     
  24. Danoff

    Danoff Premium

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    Land sucks as an investment. :p

    It's like basically the most illiquid thing you can buy. Land is super hard to sell. Very few buyers interested. You want to cash out? Better have some time on your hands. Also you can lose your land rights to squatters if you're not careful.
     
  25. Biggles

    Biggles

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    To put it in perspective (if that means anything at all at this point ), the S&P is now essentially at the level it was at the same time last year ... & it appears as if the market is set to make a big jump tomorrow. Most of the analysis I've read suggests that current stock valuations are unjustifiable based on market fundamentals. But on the other hand, an old adage states "don't fight the Fed" - the market has been so distorted by the injection of huge amounts of cash & super low interest rates that it's hard to see what "fundamentals" mean at the minute.

    With zero interest available, stocks represent the only place to put money with a hope for a long term return, so maybe people are gambling - forced to gamble - that in the long term the economy has to come back, so WTH, just stick money back in the market. In that sense, it doesn't resemble 2008/09 at all. At that time there was a strong sense that the financial world was in such a desperate state that it could lead to a complete collapse of the banking system & there was a complete lack of confidence "capitulation". Right now it's not a bear market any more, in fact FOMO (fear of missing out) is a far stronger emotion than fear of a market collapse. So - weirdly - the unemployment figures, reduced business activity, loss of income for millions of people, looming bankruptcies & global disruption seem to be discounted in favour of an ultimate "return to normal", even though that return to normal may be a long way down the road.

    What I notice is that any positive rumours regarding treatment for, or progress in containing the virus seem to lead to a jump in the markets & that includes whatever nonsense comes out of Trump's mouth ... even though everybody must surely realize that Trump lies & makes stuff up all the time to suit his political agenda. Yeah - it's hard to make sense of any of it. :indiff:
     
  26. Chrunch Houston

    Chrunch Houston Premium

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    Loving this thread so far.

    I just bought more USO.

    The price of oil will definitely rise.
     
  27. Danoff

    Danoff Premium

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    If that's true, today I will reduce my stock holdings by about 10%.

    Edit:

    Yup, just fired off about 10% of my stock holdings into cash. That sucks, cash is a terrible investment. I should buy something.
     
    Last edited: Apr 17, 2020
  28. Eunos_Cosmo

    Eunos_Cosmo

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    Last edited: Apr 17, 2020
  29. BobK

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  30. Biggles

    Biggles

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    Why?

    You would think .. but I remember my financial planner recommending investing in an energy-oriented mutual fund after oil prices tanked in 2015 on the theory that they could only go up from there. Oil is now down about 60% from where it was at that point. :ouch:

    If I look back at my investment history it is full of bad decisions made for the "right" reasons ... & very occasionally good decisions made for who knows what reasons.

    Owning property is great when prices are going up. It's the only leveraged investment most people make in their lives. But I've also seem property prices collapse & because of leveraging, even a relatively modest drop in prices can leave many home owners under water. Property prices in the GTA (Greater Toronto Area) have been going up almost uninterrupted for over twenty years. Stupidly, in 1999 I sold a commercial property in Toronto I had renovated (in a marginal area that has since become the epicentre of trendiness). I sold it for $325,000 - it would be worth somewhere between $2m & 2.5m today. Toronto has been called overpriced & due for a crash for years now, but it never seems to happen.

    On the other hand, I have business clients in Cleveland & Detroit whose houses (in nice suburban areas)have not appreciated at all in the last 25 years. Denver seems like an ideal city to buy property in - it's hard to see how prices are not going to continue to grow. Rock bottom interest rates would seem to support further home price escalation.



    Don't even go there.

    ... and up go the markets. Makes no sense to me. Is there going to be another big drop like in 2008/09?