My take on this ugly market

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stlplace
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Well, I am not going to short. Two reasons:

1) In order to short a stock, I need to open a margin account, which I dislike. Margin account means I have to borrow from the broker, which increased the risk quite a lot, and increases the “anxiety factor” which is something I dislike. A good example is: someone bought Berkshire Hathaway stock in its early days on margin could get wiped out, because the stock dropped 50% on the way. A more recent example is the CEO of Chesepeake Energy (NYSE:CHK), if we believe the story.

2) So I can not short. Why not buy the puts (or sell the calls)? Welcome to the wonderful world of Options. Well, from my observations (both my own small experiment and others experience), Options are totally different ball game. Basically we are play against time. Options have its expiration dates. While I think in this bear market, the down trend of some stocks are obvious, I have no idea how much the stock price will be at a certain period of time. Remember the old saying “dead cat bounce”. While it’s unlikely a company will use precious cash to buy back stocks these days, it’s likely we will see something like we saw on Monday Oct 10: a 960 points pop on Dow.

So what to do?

Save. Retire some debt. Get some more sleep. Do some research. Buy some fundamentally good stocks at bargain price because I believe the world is not coming to an end 🙂

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