Tuesday Thoughts

[zigguratbuilder]

Originally published at KIT KOW SKI. You can comment here or there.

Exercise: Haven’t been to the gym but once in the last week.  Need to change that. When I go to the gym, I’m motivated to do more, make more gains, eat less bullshit, keep on the game. Got caught up in a cycle at work where I was tired, so I didn’t go to the gym, so I ate crap, and

Comments

[zigguratbuilder]

Hey Chris!

First off, I need to go back and adjust: I looked through my account, and totally forgot that I started off with $3500, not $2500 (I put my tax return into the bundle last year).

Hmmm. Very difficult, and here's why:

1) You need to learn about stocks and options and stuff. Some of it can be picked up on the internet and through books and the like (I love "Options Made Easy", but it too assumes at least a small level of familiarity with stocks). Basically the methods I use are what are called "trend trading": The program I went through was through NBC University (now called "Investools"): These programs themselves often cost about 500-1000 (but to a tactile/visual learner like me they were invaluable).

But beyond that, let's say you get past that and pick up enough from Scottrade FAQs, books, the internet to begin to trade (and I think if you have the capacity and willingness to learn, you can without taking classes and the like, it's just harder, just like self-teaching any subject):

So the only problem with options/covered calls is this: Unless you're doing wonky math (as I'll start doing next month with diagonal and vertical spreads, which means you have to get an account at a place that will let you do those calls, like thinkorswim.com or options.scottrade.com (reg Scottrade won't do them, yet)), you need to own the underlying stock. And covered calls are always moved in 100-stock orders.

So that means that you have to have enough money to buy 100 shares of a stock: For less than 1K, that means that the share price has to be $9.50 or less.

To do trend trading, you need to find a stock that has a lot of volume, many trades per day (like 1 million trades or more a day): Any less than that and the trending can't be trusted as much (in other words, you can see huge spikes or drops for no apparent reason).

So to recap: 10.00 (I say "9.50" just so you have some leeway with trading fees and stuff, they're not bad but can be unexpected if you forget about them) or less per stock, and trading at a high volume. That starts to limit your pool of stocks.

Then, from there, you need to find an upward trending stock: That's the real complication when you add it to the other factors. There are probably dozens or hundreds that meet all three criteria, but with tens of thousands of stocks to choose from, its harder to find those.
Note that with PUT calls you can basically trend a stock when it's going down, and make money off it. But I find that much harder to do, especially after working so hard to find and spot "good" stocks: Because with normal options, at the end of the day you OWN the stock, so if it is trending down you have to make a decent amount of money off it and Get Out, which is harder to do than when a stock is trending upwards.

If you start opening your initial investment to $2k, $3k it becomes a lot easier to find stocks (there are many great ones in the $20-30 per share range) that match the upward trending and high volume marks. For me, I didn't just shit out 3k, I really had to work to save up and put that money off to the side.

Now, if you just do plain stocks (which is what I started with last year for the first 3 months or so), you can pick up fewer shares of a higher priced stock: You don't have to buy in sets of 100. And then when you want to move to options, you cash out of the stock you own and then buy cheaper stock that matches that profile above.

(cont)