Quote:
Originally Posted by ilnjscb
Your whole issue is commission and sitting watching the monitor. Plus you may not really grasp how a big spread (diff between bid and ask) can damage your model.
That is why pennies suck, $11 commission and large spread because of low volatility. If you are dead set against holding, try options. Unless you invest on expiry they don't lose time value over a day and have the same "what a rush" volatility of pennies but with much higher liquidity.
Pennies really are not for volatility trades. You have to know something about either the industry for the company.
A strategy you might like: Find a high volume stock trading in a stable range. Wait for a large dip (not on a "selloff" day, of course) not based on news. Buy $500 worth of calls at strike at least thirty days out but not more than ninety. Have courage.
That way you can watch your value go up and down but you stand to make some dough and the commission is less of a factor.
Obviously check all this out yourself and make your own decision. Don't buy and hold options unless you know something or can lose all your investment.
|
I see what you're saying about liquidity but there is plenty of it during these hype promotions, don't you think? Not always in terms of being able to go short, which sounds more difficult the more I find out about it.. But the spreads seem like they stay pretty tight when a penny has the spotlight on it... I'm obviously not going to buy a $.25/$.50 stock, you know?
When you say I have to "know something"- I hear you... the something I am trying to know is who's hyping the stock and how much weight they've got.. 99% of the time the fundamentals of the company don't matter because they seem to all be just garbage.
These CEOs (if you will) are in it to sell shares .. The hype campaigns seem to make things fairly predictable, no?
Options are interesting and seem to be very complex. I don't know about all of that fancy shit with the arabian condors and the taradactyls and whatever else... I'm sure that I will, in time, but right now I'm so new that I think I should just be getting a good basic understanding of stocks themselves. How share structures work, what makes prices move, how to read charts and so on.... does that makes sense??
I just don't see how I'm going to understand options without having the basics cold, you know?