Trade Stock Tip

[Denny Crane]

We both said "far out of the money" options.

Either you think there's a HUGE move in the stock price before the expiration or you expect to lose your investment.

Options that are in the money, you won't lose your investment as long as you cash in while they are still in the money.

If you buy this stock, you can hold it forever, as long as the company doesn't go bankrupt. There is no expiration. There isn't even necessarily an expectation you'll lose all your investment. Thus it is not like an option.

As far as risk goes, you consider the "what if" scenario where the stock does go to $0. You lose your investment. In this case, the loss is in the low $hundreds ($160-ish in my case). If you can't afford to lose that money, don't invest. Compared to the rest of my investments, $160 is small enough that the risk is minimal.

The upside is considerable - more than arbitrary penny stocks. With a far out of the money option, there's considerable upside as well, but if the options expire out of the money, you lose.

With this stock, I don't consider the $160 lost the minute I bought the stock. I don't expect the stock to go to $0 for quite a while - I expect their sales to increase due to getting their app prominently available on Roku and many 4K TVs which are selling well. As Ray Kroc once said, "early to bed, early to rise, advertise advertise advertise."

With a far out of the money option, I expect to lose my money from the outset.

 

[Denny Crane]

Also, like I said, options are either insurance or you are outright gambling as if you were in Vegas. If you know for sure the stock is going to move enough to make your options a winner, you're going on insider information.

Though you might have some publicly available information like "experts expect great earnings report" when it comes to a stock, you have publicly available information like "the odds of rolling a 7 are 6:36 or 1:6" in Vegas.

And like in Vegas, you either win your bet or lose 100% of your bet.

 

[rasheedfan2005]

There were 13.5M shares sold yesterday. You'll be able to sell at market within seconds. As long as the market is open...

thanks for the info ive really been needing to start investing. right now my portfolio is slim with a house and my state retirement, ive been needing to find at least 1 more way of investing. im wondering if etrade would be a good way to go or if i should try usaa since i do all my banking with them.

as far as taxes, do they send you a form like your job and your mortgage company do at the end of the year? so far ive been able to keep doing turbo tax online but i dont want stuff to get so complex i need to take stuff to a professional

 

[Denny Crane]

thanks for the info ive really been needing to start investing. right now my portfolio is slim with a house and my state retirement, ive been needing to find at least 1 more way of investing. im wondering if etrade would be a good way to go or if i should try usaa since i do all my banking with them.

as far as taxes, do they send you a form like your job and your mortgage company do at the end of the year? so far ive been able to keep doing turbo tax online but i dont want stuff to get so complex i need to take stuff to a professional

Yep.

I use Schwab.com. At the end of the year, there's a link on the site to download the tax documents. From those, you get the info about how much interest, dividends, and capital gains you earned. You enter this information into TurboTax (or whatever) in the right place and that's it.

It can get a little tricky if you buy and sell a stock, though. Consider you buy 100 shares of xyz corp. each month. In year 3 you sell 100 shares. Which 100 shares is it? You get to decide. So you choose the 100 that have the lowest capital gains return and that you've held for at least a year. For example, you bought 100 shares at $10 and 100 shares at $11 and the stock is at $12 when you sell. You'd want to sell the $11 shares so you have $1 x 100 shares of capital gains. If you chose the $10 shares, you'd have $2 x 100 shares of capital gains. You'd only choose the $2 gain if the $10 shares were bought this tax year. The capital gains tax rates are your ordinary income tax rate for shares sold the same year you bought them (something like 25%) while long term capital gains rate is 15% on shares you bought over a year ago.

From the way you describe your situation, I would be selling stocks much, just buying. That's been the proven way to succeed at stock market investing. Buy and hold. Also diversify (put money in a variety of stocks and sectors) so you don't have all your eggs in one basket.

You can also open a retirement account and put up to $6500/year into it PRE TAX. You can buy/sell stocks as you wish in that account. There is a significant penalty for withdrawing money from this kind of account before you're age 62 (I think it's 62). If you're saving for retirement and buying and holding, this kind of account is a good idea. If you want to do more than $6500, you do $6500 in the retirement account and the rest in an investment/brokerage account.

Your choice to use USAA or another brokerage is up to you. If you're buying $100 worth of stock a month and the commissions are $8, that's an 8% tax on every purchase! You might want to save up $200 and buy every other month so the commissions end up being 4%. You get the idea. If USAA is $9 and Schwab is $8 commissions, Schwab is the better deal. It's up to you if the convenience of USAA is worth the cost difference.

Schwab does make it really easy to set up transfers from your USAA account to your schwab.com accounts. The transfers don't happen immediately though. It can take a day or two or three before the funds are available in your schwab.com account. It's been fine for my purposes.

 

[Denny Crane]

PLEASE NOTE:

Any ideas or suggestions made by myself or anyone else (BB30) are worth less than the $.02 offered. We offer no guarantees of success. I am not a broker or involved with Wall St. in any way.

Basically I'm saying don't come sue us if things don't work out. Caveat Emptor.

 

[rasheedfan2005]

Yep.

I use Schwab.com. At the end of the year, there's a link on the site to download the tax documents. From those, you get the info about how much interest, dividends, and capital gains you earned. You enter this information into TurboTax (or whatever) in the right place and that's it.

It can get a little tricky if you buy and sell a stock, though. Consider you buy 100 shares of xyz corp. each month. In year 3 you sell 100 shares. Which 100 shares is it? You get to decide. So you choose the 100 that have the lowest capital gains return and that you've held for at least a year. For example, you bought 100 shares at $10 and 100 shares at $11 and the stock is at $12 when you sell. You'd want to sell the $11 shares so you have $1 x 100 shares of capital gains. If you chose the $10 shares, you'd have $2 x 100 shares of capital gains. You'd only choose the $2 gain if the $10 shares were bought this tax year. The capital gains tax rates are your ordinary income tax rate for shares sold the same year you bought them (something like 25%) while long term capital gains rate is 15% on shares you bought over a year ago.

From the way you describe your situation, I would be selling stocks much, just buying. That's been the proven way to succeed at stock market investing. Buy and hold. Also diversify (put money in a variety of stocks and sectors) so you don't have all your eggs in one basket.

You can also open a retirement account and put up to $6500/year into it PRE TAX. You can buy/sell stocks as you wish in that account. There is a significant penalty for withdrawing money from this kind of account before you're age 62 (I think it's 62). If you're saving for retirement and buying and holding, this kind of account is a good idea. If you want to do more than $6500, you do $6500 in the retirement account and the rest in an investment/brokerage account.

Your choice to use USAA or another brokerage is up to you. If you're buying $100 worth of stock a month and the commissions are $8, that's an 8% tax on every purchase! You might want to save up $200 and buy every other month so the commissions end up being 4%. You get the idea. If USAA is $9 and Schwab is $8 commissions, Schwab is the better deal. It's up to you if the convenience of USAA is worth the cost difference.

Schwab does make it really easy to set up transfers from your USAA account to your schwab.com accounts. The transfers don't happen immediately though. It can take a day or two or three before the funds are available in your schwab.com account. It's been fine for my purposes.

PLEASE NOTE:

Any ideas or suggestions made by myself or anyone else (BB30) are worth less than the $.02 offered. We offer no guarantees of success. I am not a broker or involved with Wall St. in any way.

Basically I'm saying don't come sue us if things don't work out. Caveat Emptor.

thanks for the info, no im not trying to sue you nor do i consider you my financial adviser, ill sign that if you insist lol. ive just been wanting to learn about it. to me buying individual stocks is like playing poker. i already have a retirement account, im just looking to make some medium - long term gambles with money i can afford to lose if i bust.

one of my friends says i should buy good stocks like at&t and verizon because eventually i can live off dividends but that's too much to gamble for me at the moment and i still dont understand the process all that well. you helped clear some of it up. im kind of looking to do like you did, find something cheap i think has a chance in the market and drop a couple hundred as a gamble, hang on to it for a few years, either lose it and write if off or hit it big.

i learned about the cost of cashing an IRA early when i lost employment in oregon. i waited the 2 years and cashed it out. while the penalty wasn't as bad as pre 2 year it was pretty rough, i still made a few hundred from the employer match after taxes and penalties but it certainly wasn't a lot compared to the amount that was in the account.

 

[Denny Crane]

Another stock I find interesting is Annaly Capital Management. It is a REIT (real estate investment trust) that specializes in owning mortgage paper (vs. owning actual property).

What I like about the stock is that it's reliably traded between ~$8.25 and ~$12.00 for the past 3 years or so. It pays a big dividend of 11%-12% and the dividend has been reliable. You're not going to make a killing on the stock price, but you should double your money in about 6.5 years.

It survived the financial crisis, though you would have lost 1/2 your principle. If all you ever do is buy the stock and enjoy the dividend, the principle variation doesn't matter so much. If they cut dividends and the stock goes down, you can hang on for the lower dividend or sell at a capital loss (though your dividends earned will offset that in part).

The stock wasn't affected much by the most recent Fed rate hike. You'd think it would be sensitive to such hikes, since the paper it owns is harder to sell if newer issued paper pays better interest rates.

If they do decide to cut the dividend, you might still earn 8% or so. That's my hunch/guess. Of course I could be wrong.

You can find bigger dividends, but I'm wary of the quality of the stock. It's really no fun to make 11% interest on dividends and lose 11% in equity (e.g. stock price drops 11%).

 

[PDXFonz]

I hope this is better than your last tip of buying Enron stock.

 

[Denny Crane]

I hope this is better than your last tip of buying Enron stock.

That was barfo's tip.

 

[barfo]

That was barfo's tip.

Another stock I find interesting is Annaly Capital Management. It is a REIT (real estate investment trust) that specializes in owning mortgage paper (vs. owning actual property).

Funny enough, I actually do own a little NLY.

Another REIT you should consider is HCP. Not only does it pay a decent dividend, but it keeps your yard looking good.

barfo

 

[MARIS61]

Before I commit to attaining additional massive wealth from penny stock tips on a sports message board, can someone please help me set up one of those Clinton Foundation-type Cayman offshore accounts to hide my massive golden footprint from the IRS?

I'm already drowning in obscene profits from placing thousands of tiny classified ads in thousands of newspapers around the country...