Talking Stocks 2.0

[RyanO]

Originally Posted by 7sins

Options Training Part 2 with 7Sins: HOW TO GENERATE EASY CASH FLOW WITH YOUR STOCKS VIA COVERED CALLS


I know a lot of you have been asking for this on Covered Call strategies and it took me a bit longer to write but hopefully all of you find it helpful.

Hopefully everyone enjoyed reading my Options Training Part 1, understanding the basics (located here: https://www.rolexforums.com/showpost...postcount=6217), this will be imperative to understanding all of my future posts on options as it sets the foundation to effectively using options. Please note I write all of this as I genuinely enjoy educating and helping people, my goal is for all of us to make more money and control risk while doing it - please note I am not responsible nor liable for what you do with option trading.

What is a covered call?: A covered call is an option strategy that allows you to generate very low risk (essentially free) income on your existing stock positions. This means you currently own the underlying stock and you would write (sell to open) a call which then IMMEDIATELY adds income to your account. Note this is very different from buying a call as previously discussed. We will cover writing naked calls and puts in a different post, for now, stay away from writing naked calls as these are very risky and have unlimited max loss. This is also an excellent tool to use as an exit strategy, GET PAID TO SELL YOUR STOCK or reduce the cost basis of your existing stock.

IMPORTANT We write covered calls on stocks that we believe will have limited upside movement or will trade sideways, want to get paid to sell a position we were planning to sell anyways and or stock we are okay with it being "called away" (more on that later). This means the stock you own can be assigned and you have the potential of early assignment. There are ways to hedge against your stock being called away from you, we will discuss later too and how you can use the income from your covered calls to generate more total return. Lots to cover and a real life example will put all of it together!

The easiest way to learn is through a real life example, so lets work our way through one and the possible outcomes.

Lets use CRSR as an example as I have seen discussed several times on here. In our example, you own 10,000 shares of CRSR for a current value of $384,300 (sp today is $38) - note I do not own CRSR, this is for example only. Now you want to use your existing CRSR stock to generate income. Remember from part 1, 100 shares = 1 option contract.If you own 10,000 shares that means you can write up to 100 option contracts (100 contracts = 10,000 shares). You do NOT have to write the same number of contracts as shares you own, so you can write less than 100 contracts in this example. You should NOT write more contracts than shares you own.

EXPIRATION: The longer the expiration the more premium you will collect, this should be intuitive as this is the longer the buyer of your option has for the price to hit the strike - this will make more sense in the example. IE a march $35 strike is 1 month from expiration, not much time for stock to appreciate to the strike you selected compared to a dec $35 which is a much longer expiration and thus more time for the stock to hit your strike at expiration, the latter will allow you to collect more premium.

STRIKE PRICE: This is important, the higher the strike price you select, the less income you will generate as the less likelihood the stock price hits the strike price by expiration. When I pick a strike price, I look at 50 day and 200 day moving averages to see resistance in the stock price (also depends on conviction and expiration), then I pick a strike price slightly higher as there should be resistance at those levels. We will discuss how to pick strike prices via delta in black scholes modeling in a later post. You will also want to look at level 2 data so you can see what bids are at each price level for the stock. IE if the stock is trading at $30 and there are massive buy orders at $31 and $32, that means it will have significant resistance to breakthrough $32, thus a strike at $35 could be very profitable. We will also discuss this in a later post.

Lets use a short expiration and a long expiration in our example. The first is the option chain below for CRSR March 19th which is about 7 weeks to expiration. Notice the farther out of the money aka the higher the strike price, the lower the price of the call aka the lower the premium you receive.

Now, lets say you selected the $45 strike, you can see the last price was $4.50. Remember you are not buying call options, you are WRITING THEM (sell to open), that means someone is purchasing them from you thus they have to pay you the $4.50 per contract. Ideally you want to pick a strike price you would be comfortable selling your stock at. Generally you will hold these to expiration or until stock is called away from you.



EXAMPLE 1 COVERED CALL $45 STRIKE 3/19/21 You write the call (aka sell to open) at $45 strike with a price of $4.50. YOU ARE INSTANTLY CREDITED $45,000 of premium into your account. That is ALWAYS yours to keep regardless of what happens to the stock price. Ideally you want the stock price to stay below the strike price so your stock isn't called away - caveats mentioned later.

Scenario 1 of EX1 CRSR never reaches $45:There are 7 weeks until your $45 strike option expires. As soon as you write the option you were immediately credited with $45k into your account. In this scenario, CRSR bounces around but never hits $45 by expiration, thus it is not profitable for the buyer of your option to exercise the option at $45. This means that his option expires worthless, you keep your $45k premium and your CRSR stock.

What's the risk? Your option is collateralized by your stock, thus if the stock price on CRSR falls to $30, your 100k shares is now only worth 300k (this would have happened if you wrote the call or not) BUT now you have 45k in premium, so your loss is much lower if you just held the stock. You could have completely sold the stock but that would have required knowing it would fall to $30, so the covered call at least provides a nice cushion here.

Scenario 2 of EX2 CRSR trades above $45: Just like in Scenario 1, as soon as you write the 100 contracts you are immediately credited $45k in premium into your account. CRSR rallies to $50, the buyer of your option will likely execute the option and you will be forced to sell your shares (this creates a taxable event) at $45 strike/stock price (so you can see you missed out on $5 upside). This means you made the $45k premium from the option and the stock price went from $38 to $50 but you were forced to sell your shares at the strike of $45 and thus you made $7/share ($45-38 stock price now) which would be 70k. So in this example you made 45k premium plus 70k the difference between the price today and what the strike you are forced to sell at would be $115k total profit. Not bad!

What is the risk EX 2? The risk here is that the CRSR skyrockets and you would have missed out on all of that potential upside but we can hedge against that by...

VERY IMPORTANT HOW TO HEDGE AND PROFIT IF STOCK RISES: Lets say in EX 2 you want to write the covered call BUT you are worried the stock might continue to rise past the strike. You can take a part of the premium you collected in this option from writing a call and buy a call (buy to open). So in this example, lets say you took $20k of your $45k premium you collected when writing the call to buy a call on CRSR so you don't miss out if the stock sky rockets. I typically like to buy the call more OTM than the strike I wrote the call at, so in this example lets just say I bought the call for a $50 strike which is 3.36 last price. If the stock price goes on a run to $60, that call option would appreciate from $20k to 57.1k. Thus you made money collecting the premium from writing the call and did not miss out on CRSR running past the strike and your stock being called away. Another trick here that I use is I will take the premium from writing covered calls and buy longer dated leaps to hedge if the stock goes up in the long run. We can create artificial leverage for more call upside when we write puts but that will be a later post.

Lets look at another example of CRSR with a much longer expiration, Dec 17 2021, 9 months to expiration. The same $45 strike here pays $10.88. That means you would get a premium of $108k credited into your account immediately on writing 100 contracts. The difference here is the buyer who purchased this option from you has until Dec 17th for CRSR to hit the $45 strike. USUALLY the assignment of the stock being called away from you comes at expiration, however the stock can be called away prior to expiration). Nothing changes from what I mentioned in the two above examples, only difference here is you are getting more premium but your stock is being locked up for a longer period of time aka more time the stock could go down (you could close prior to expiration which I will cover later).


THINGS TO CONSIDER:

IMPLIED VOLATILITY: The higher the IV the more premium you are going to collect. Remember that higher the IV means the higher the implied volatility (stock moves in price more) which means more likelihood your stock gets called away. If you were planning on selling your stock, why not get PAID to sell it assuming the price doesn't crash (again we want to focus on stocks we don't expect much movement in)? The opposite holds true, if IV is low, you are going to get paid less to write the calls against your stock but less likelihood your stock gets called away.

OTM/ITM: The further out of the money strike you select, the less premium you are paid but also the less likely your stock gets called away. The farther in the money strike you pick, the more you get paid and the more likely your stock will get called away.

SELL BEFORE EXPIRATION: This is called a close out, you can buy back the covered calls, at a gain or loss and still retain your stock. You can do this to lock in early gains quickly, assuming the price drops, especially on short dated options as theta/time decay will kick in hard. Lets say you write a 30 day call, stock price goes down a week later, you can close out that call and lock in a good portion of your premium while not having to give up your stock.

IMT COVERED CALL When you sell a call ITM, you will not profit from the stock rising in price because it is already in the money, but you will collect more of a premium since it is more in the money and offers better downside protection. I typically use these when I am looking to sell a position and get paid to sell it, the risk here is if the stock crashes below the strike, I still get my premium but still own the stock which is now at a loss. You of course can buy an OTM put to hedge against this.

Dividends IMPORTANT: Make sure you take into account dividends before writing a call and selecting an expiration. Dividend payments prior to expiration will change the value of the option. Why? Because the stock price will drop by the amount of the dividend on the ex-div date. This is also a reason why call buyers exercise early. Most people overlook this.

This is covering a lot, please feel free to ask any questions and I can walk through more examples and add more clarity. More posts to come if people continue to find these helpful as they are quite time intensive. Cheers.

Greatly appreciate your insights and informative post.

[m j b]

I looked at GME before the open; it is just nuts. Too many speculators and as noted above, many people aren't looking at technicals and balance sheets, just momentum and short positions.

Good move @gnuyork, enjoy the Speedy!

[owl.]

Originally Posted by bimmer nerd

Short Squeeze

I need to look up what that means /:


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[JParm]

https://www.cnbc.com/2021/01/27/fed-...unchanged.html

The Fed continues to provide the support needed to maintain market conditions (ultimately by trying to boost the economy). Still in a bull market here, gents.

[Vishy26]

Originally Posted by jpeezy14@hotmail.com

https://www.cnbc.com/2021/01/27/fed-...unchanged.html

The Fed continues to provide the support needed to maintain market conditions (ultimately by trying to boost the economy). Still in a bull market here, gents.

Excellent

[capital]

I bought this 2 days ago.
Is it what a bubble looks like?

[ratlover]

BB has been on a tear recently.

[Kowaco]

This is hilarious I hope the whole thing comes crashing down


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[PeqFB]

Tried to sell short on GameStop but ETrade won’t let me. And I rarely sell short.

[uscmatt99]

Originally Posted by Kowaco

This is hilarious I hope the whole thing comes crashing down


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I wouldn't wish that on anyone, it's interesting to see a group of loosely organized little guys making some money in a traditionally big guy game. Of course, I won't shed any tears for someone who loses their shirt, buyer beware.

As a guy who just contributes to his 401K and some other tax-deferred investments, I find this all fascinating. I have a question though. What benefit does the options market provide to the overall stock market? Or put another way, what would happen if all of a sudden, options trading was no longer allowed? What effect do you think this would have on a 401K Joe like me?

[7sins]

Originally Posted by PeqFB

Tried to sell short on GameStop but ETrade won’t let me. And I rarely sell short.

You should look to buy puts opposed to shorting, lending rates to short stocks are very high and on GME they are astronomical. You will pay a high premium for the puts but the most you can lose is the amount you put in. If GME keeps skyrocketing you will get a margin call if you short and will be seriously underwater. Puts are the way here.

March 19th $50p is $15 and April $50P is $18. When this eventually settles back to sub $20 (look at tlry in 2019), your puts should be up 200-300%. It will come back down especially when people start profit taking and moving into new positions, the floor will fall out. I will look to start this position soon but going to wait a few more days to see where gme goes.

[Xelorpepsi]

Originally Posted by uscmatt99

I wouldn't wish that on anyone, it's interesting to see a group of loosely organized little guys making some money in a traditionally big guy game. Of course, I won't shed any tears for someone who loses their shirt, buyer beware.

As a guy who just contributes to his 401K and some other tax-deferred investments, I find this all fascinating. I have a question though. What benefit does the options market provide to the overall stock market? Or put another way, what would happen if all of a sudden, options trading was no longer allowed? What effect do you think this would have on a 401K Joe like me?

Options are (and should be) used as a hedge to reduce a specific risk and / or gain exposure to a specific type of opportunity. If professional investors could no longer implement these strategies, the volatility would likely increase massively and (most) institutions would be forced to unwind massive positions due to a sudden change in risk profile (cf. the option greeks).

[7sins]

Originally Posted by asloper6001

7sins you are the MAN!!! Thanks for all you do and the great write up and information!!

Originally Posted by bimmer nerd

Agreed. Thanks Sins! I saved your post I will go thru it later on in the day. Appreciate the time and effort you put into it.

Originally Posted by RyanO

Greatly appreciate your insights and informative post.

You guys are very welcome, glad you found it helpful. Ask any questions, happy to help.

[uscmatt99]

Originally Posted by Xelorpepsi

Options are (and should be) used as a hedge to reduce a specific risk and / or gain exposure to a specific type of opportunity. If professional investors could no longer implement these strategies, the volatility would likely increase massively and (most) institutions would be forced to unwind massive positions due to a sudden change in risk profile (cf. the option greeks).

I see, at least I think I see, thanks for the succinct explanation. So options are a tool devised to decrease volatility and mitigate risk.

But in some circumstances such as the current Gamestop play, options are actually increasing volatility, right? My understanding is that a hedge fund or two shorted Gamestop in an attempt not to mitigate risk, but make a ton of money in a short period of time by betting against the company. Because shorting is making a bet with borrowed shares. Then a group of individual investors informally decided to try and short-squeeze these hedge funds in their own attempt to cash in.

So I think I understand how options can help to decrease volatility, that makes sense. But specifically with regards to shorting, or really any investing that requires borrowing shares to make a play, with the potential for massive loss greater than cash on hand, is this also beneficial to the market as a whole? Keep in mind my only education on this topic is Billions and 7sins

[AshCashEmAll]

I’m riding the wave hope it goes well.


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[chadwick4eva]

Originally Posted by jpeezy14@hotmail.com

Interesting take, and no offense taken, but please don't take offense to what I say below.

For the part that I've bolded - I'm not going to do your homework for you. I've said in the past what PINS and SE bring to the table, and there are endless amounts of sites that will bring you what you are looking for.

Are they expensive? Sure - so is the rest of the market. Are growth stocks going to trade at higher valuations than value stocks? Yes, that's why they are growth stocks; I don't expect profits, I expect growth. Take a look at how SE is growing and what they're doing to further their business, and then decide if that's what you want to invest in - not because I said so.

I think we use this thread to let people know what we're investing in, give our 2 cents on action in the market, and spread a bit of education / news as well. If you're looking for a full-blown analysis on every stock presented here, I think you've come to the wrong place.

Personally it sounds like you have zero concept of what intrinsic value of an asset is. This is not the "growth" vs. "value" nomenclature issue that mainstream "investors" run into all the time. It's the concept that any asset's inherent worth is the present value of future profits of the firm, discounted against the desired return based on the class and perceived "riskiness" of that asset. It's the backbone and guiding principle that the vast majority of the greatest investors- Graham, Buffett, Munger, Lynch, Marks, etc. of the past century have used to determine whether or not a particular asset is trading at a discount relative to its fair value given a set of forecasted assumptions about the firm.

This can be applied to any asset- it can be a "growth stock" trading at a higher or even negative profit multiples, it can be a "value stock"- usually a slow company trading at a lower P/E, P/S, or P/FCF ratio. This kind of analysis actually led me to conclude that etsy, trading at a massive 111 P/E ratio and had a massive run recently, is actually a somewhat reasonable buy at the moment if you conservatively project their cash flows into the future. It led me to sell costco, as my projected return dropped to 5% for the next 10 years (after the recent run up) even when making liberal assumptions about how much more they could grow. If any asset's future returns drop you a tier on the capital markets curve, then why would I hold onto a high quality equity when I could buy high grade corporate bonds and achieve the same rate of return instead with close to no risk of principal not being paid back?

The issue with the two companies you've talked about is that there's a complete disconnect between the price and the underlying aspects of the business and what's actually taking place. PINS has had to spend more money to actually achieve revenue growth. Despite massive growth of revenues- they are still burning cash:

https://www.macrotrends.net/stocks/c...erest/pe-ratio

Their gross margins would suggest they should be fine- almost 70%, but they have a dismal -30% operating margin. They haven't been able to turn the corner yet. How much gross margin do they need to achieve to get to a point where they have a positive operating margin and are cash flowing? 70 is already enormous. Why has the stock price of pins flourished almost 300% in the past year even with all of this information readily available to the public via 10ks, 10qs, and other financial reporting? I think that's a great question and can likely be attributed to the general euphoria we are seeing in multiple places at the moment.

Many stocks these days, including pinterest, remind me of groupon- once a hot tech darling in the early 2010s, groupon was growing revenues by a whopping 200% quarter over quarter at one point back in the earlier part of the decade. The stock price was on fire after the IPO.

https://www.macrotrends.net/stocks/c...roupon/revenue

But guess what happened? Groupon was bringing in billions, and was never able to turn the corner in terms of profitability- even now, the firm is still lighting money on fire every quarter, with negative earnings and near negative cash flows.

https://www.macrotrends.net/stocks/c...oupon/pe-ratio

Guess what investors decided after groupon never actually got to where they needed to be? Well just look at the stock price today. People who invested at that euphoric top back in 2013 have lost over 90% of that value today. That famous Buffett quote "price is what you pay, [intrinsic] value is what you get" never rang so true than in this short case study.

And as Ben Graham once said: "In the short term the stock market is a voting machine, but in the long run it is a weighing machine."
Time is the greatest de-risking instrument in the world of investing and that will always be the case.

How anyone conducts their "investing" is up to them- you can choose to be a cheerleader for the price of a stock, and say things like "I think it's really cheap right now" relative to what the price has been the past week, the past month, the past year or 10 years, and wishfully hope that it will continue to go up, but there's really no value in those types of statements- it doesn't actually provide a clear picture of what's going on, if anything it actually misleads others into making bad and misinformed decisions. This herd mentality is extremely pervasive in social media today- and it is dangerous.

And no I'm not asking for anyone to do my homework for me. I have a process and system that works for me that I'm happy with. I will always employ that process prior to making any decisions. But statements like "I bought these calls because reddit said it would go up," or "I bought this because I think it's a great company" literally contributes no substance to this thread. If someone makes money with this approach- that's awesome! Take the profit and run- or buy something awesome (like a speedmaster)with it. But at its core that isn't investing. This thread has been great in the past- I've seen a lot of thoughtful content posted here. I appreciate a lot of the stuff that 7sins does especially, I don't do options trading but reading about it is fascinating.

[JParm]

Originally Posted by chadwick4eva

Personally it sounds like you have zero concept of what intrinsic value of an asset is. This is not the "growth" vs. "value" nomenclature issue that mainstream "investors" run into all the time. It's the concept that any asset's inherent worth is the present value of future profits of the firm, discounted against the desired return based on the class and perceived "riskiness" of that asset. It's the backbone and guiding principle that the vast majority of the greatest investors- Graham, Buffett, Munger, Lynch, Marks, etc. of the past century have used to determine whether or not a particular asset is trading at a discount relative to its fair value given a set of forecasted assumptions about the firm.

This can be applied to any asset- it can be a "growth stock" trading at a higher or even negative profit multiples, it can be a "value stock"- usually a slow company trading at a lower P/E, P/S, or P/FCF ratio. This kind of analysis actually led me to conclude that etsy, trading at a massive 111 P/E ratio and had a massive run recently, is actually a somewhat reasonable buy at the moment if you conservatively project their cash flows into the future. It led me to sell costco, as my projected return dropped to 5% for the next 10 years (after the recent run up) even when making liberal assumptions about how much more they could grow. If any asset's future returns drop you a tier on the capital markets curve, then why would I hold onto a high quality equity when I could buy high grade corporate bonds and achieve the same rate of return instead with close to no risk of principal not being paid back?

The issue with the two companies you've talked about is that there's a complete disconnect between the price and the underlying aspects of the business and what's actually taking happening. PINS has had to spend more money to actually achieve revenue growth. Despite massive growth of revenues- they are still burning cash:

https://www.macrotrends.net/stocks/c...erest/pe-ratio

Their gross margins would suggest they should be fine- almost 70%, but they have a dismal -30% operating margin. They haven't been able to turn the corner yet. How much gross margin do they actually need to achieve to get to a point where they have a positive operating margin and are cash flowing? 70 is already enormous. Why has the stock price of pins flourished almost 300% in the past year even with all of this information readily available to the public via 10ks, 10qs, and other financial reporting? I think that's a great question and can likely be attributed to the general euphoria we are seeing in multiple places at the moment.

Many stocks these days, including pinterest, remind me of groupon- once a hot tech darling in the early 2010s, groupon was growing revenues by a whopping 200% quarter over quarter at one point back in the earlier part of the decade. The stock price was on fire after the IPO.

https://www.macrotrends.net/stocks/c...roupon/revenue

But guess what happened? Groupon was bringing in billions, and was never able to turn the corner in terms of profitability- even now, the firm is still lighting money on fire every quarter, with negative earnings and near negative cash flows.

https://www.macrotrends.net/stocks/c...oupon/pe-ratio

Guess what investors decided after groupon never actually got to where they needed to be? Well just look at the stock price today. People who invested at that euphoric top back in 2013 have lost over 90% of that value today. That famous Buffett quote "price is what you pay, [intrinsic] value is what you get" never rang so true than in this short case study.

And as Ben Graham once said: "In the short term the stock market is a voting machine, but in the long run it is a weighing machine."
Time is the greatest de-risking instrument in the world of investing and that will always be the case.

How anyone conducts their "investing" is up to them- you can choose to be a cheerleader for the price of a stock, and say things like "I think it's really cheap right now" relative to what the price has been the past week, the past month, the past year or 10 years, and wishfully hope that it will continue to go up, but there's really no value in those types of statements- it doesn't actually provide a clear picture of what's going on, if anything it actually misleads others into making bad an misinformed decisions. This herd mentality is extremely pervasive in social media today- and it is dangerous.

And no I'm not asking for anyone to do my homework for me. I have a process and system that works for me that I'm happy with. I will always employ that process prior to making any decisions. But statements like "I bought these calls because reddit said it would go up," or "I bought this because I think it's a great company" literally contributes no substance to this thread. If someone makes money doing that as well- that's awesome! Take the profit and run- or buy something awesome (like a speedmaster)with it. But at its core that isn't investing. This thread has been great in the past- I've seen a lot of thoughtful content posted here. I appreciate a lot of the stuff that 7sins does especially, I don't do options trading but reading about it is fascinating.

Thanks for the lesson.

You've literally brought nothing different to the table from your last post, while the rest of the people in the thread have moved on and continue to contribute as they see fit.

[chadwick4eva]

Originally Posted by jpeezy14@hotmail.com

Thanks for the lesson.

You've literally brought nothing different to the table from your last post, while the rest of the people in the thread have moved on and continue to contribute as they see fit.

Two of the comments since I last posted:

"BB has been on a tear recently"

"I'm riding the wave hoping it goes up"

hIgH qUaLiTy CoNtEnT

[huncho]

Originally Posted by chadwick4eva

Two of the comments since I last posted:

"BB has been on a tear recently"

"I'm riding the wave hoping it goes up"

hIgH qUaLiTy CoNtEnT

there were posts here dating back months about why bb can be a good investment and undervalued. not every post on here has to be some analysis does it? someone can't just make a comment that a stock has had a crazy week? lol what

[LA-RealEstateAgent]

I think NAKD will be tomorrow's big mover in the early morning. I bought a thousand shares of Nokia also

[NYG1121]

Originally Posted by chadwick4eva

Personally it sounds like you have zero concept of what intrinsic value of an asset is. This is not the "growth" vs. "value" nomenclature issue that mainstream "investors" run into all the time. It's the concept that any asset's inherent worth is the present value of future profits of the firm, discounted against the desired return based on the class and perceived "riskiness" of that asset. It's the backbone and guiding principle that the vast majority of the greatest investors- Graham, Buffett, Munger, Lynch, Marks, etc. of the past century have used to determine whether or not a particular asset is trading at a discount relative to its fair value given a set of forecasted assumptions about the firm.

This can be applied to any asset- it can be a "growth stock" trading at a higher or even negative profit multiples, it can be a "value stock"- usually a slow company trading at a lower P/E, P/S, or P/FCF ratio. This kind of analysis actually led me to conclude that etsy, trading at a massive 111 P/E ratio and had a massive run recently, is actually a somewhat reasonable buy at the moment if you conservatively project their cash flows into the future. It led me to sell costco, as my projected return dropped to 5% for the next 10 years (after the recent run up) even when making liberal assumptions about how much more they could grow. If any asset's future returns drop you a tier on the capital markets curve, then why would I hold onto a high quality equity when I could buy high grade corporate bonds and achieve the same rate of return instead with close to no risk of principal not being paid back?

The issue with the two companies you've talked about is that there's a complete disconnect between the price and the underlying aspects of the business and what's actually taking place. PINS has had to spend more money to actually achieve revenue growth. Despite massive growth of revenues- they are still burning cash:

https://www.macrotrends.net/stocks/c...erest/pe-ratio

Their gross margins would suggest they should be fine- almost 70%, but they have a dismal -30% operating margin. They haven't been able to turn the corner yet. How much gross margin do they need to achieve to get to a point where they have a positive operating margin and are cash flowing? 70 is already enormous. Why has the stock price of pins flourished almost 300% in the past year even with all of this information readily available to the public via 10ks, 10qs, and other financial reporting? I think that's a great question and can likely be attributed to the general euphoria we are seeing in multiple places at the moment.

Many stocks these days, including pinterest, remind me of groupon- once a hot tech darling in the early 2010s, groupon was growing revenues by a whopping 200% quarter over quarter at one point back in the earlier part of the decade. The stock price was on fire after the IPO.

https://www.macrotrends.net/stocks/c...roupon/revenue

But guess what happened? Groupon was bringing in billions, and was never able to turn the corner in terms of profitability- even now, the firm is still lighting money on fire every quarter, with negative earnings and near negative cash flows.

https://www.macrotrends.net/stocks/c...oupon/pe-ratio

Guess what investors decided after groupon never actually got to where they needed to be? Well just look at the stock price today. People who invested at that euphoric top back in 2013 have lost over 90% of that value today. That famous Buffett quote "price is what you pay, [intrinsic] value is what you get" never rang so true than in this short case study.

And as Ben Graham once said: "In the short term the stock market is a voting machine, but in the long run it is a weighing machine."
Time is the greatest de-risking instrument in the world of investing and that will always be the case.

How anyone conducts their "investing" is up to them- you can choose to be a cheerleader for the price of a stock, and say things like "I think it's really cheap right now" relative to what the price has been the past week, the past month, the past year or 10 years, and wishfully hope that it will continue to go up, but there's really no value in those types of statements- it doesn't actually provide a clear picture of what's going on, if anything it actually misleads others into making bad and misinformed decisions. This herd mentality is extremely pervasive in social media today- and it is dangerous.

And no I'm not asking for anyone to do my homework for me. I have a process and system that works for me that I'm happy with. I will always employ that process prior to making any decisions. But statements like "I bought these calls because reddit said it would go up," or "I bought this because I think it's a great company" literally contributes no substance to this thread. If someone makes money with this approach- that's awesome! Take the profit and run- or buy something awesome (like a speedmaster)with it. But at its core that isn't investing. This thread has been great in the past- I've seen a lot of thoughtful content posted here. I appreciate a lot of the stuff that 7sins does especially, I don't do options trading but reading about it is fascinating.

Thanks for this wonderful insight. Breath of fresh air!

[AshCashEmAll]

Originally Posted by LA-RealEstateAgent

I think NAKD will be tomorrow's big mover in the early morning. I bought a thousand shares of Nokia also

“Stocks only go up”


Sent from my iPhone using Tapatalk

[chadwick4eva]

Originally Posted by huncho

there were posts here dating back months about why bb can be a good investment and undervalued. not every post on here has to be some analysis does it? someone can't just make a comment that a stock has had a crazy week? lol what

I'm saying that the percentage of high quality, thoughtful posts here relative to the whole used to be higher than what it is now. I always knew I could come in and feel like I was learning something from someone who had superior insight or expertise in an area or field I did not- whether that was gaining a better understanding of a company I had never heard of, looking at some fundamental trends over time in an obscure small cap, global macroeconomic trends, learning about a new drug or medical device therapy in the pipeline and the safety/efficacy data coming out of clinical trials, etc.

I know what blackberry post you're talking about- it was great and very thoughtful! But it seems like things have regressed a bit in the past 1-2 months from where they were.

[sokoloka]

Originally Posted by chadwick4eva

I'm saying that the percentage of high quality, thoughtful posts here relative to the whole used to be higher than what it is now. I always knew I could come in and feel like I was learning something from someone who had superior insight or expertise in an area or field I did not- whether that was gaining a better understanding of a company I had never heard of, looking at some fundamental trends over time in an obscure small cap, global macroeconomic trends, learning about a new drug or medical device therapy in the pipeline and the safety/efficacy data coming out of clinical trials, etc.

I know what blackberry post you're talking about- it was great and very thoughtful! But it seems like things have regressed a bit in the past 1-2 months from where they were.

Sign of the times and a signal of the peak for me. Every rando I know has started hitting me up about STONKS and that's when it's time to get cash ready to deploy.

[huncho]

Originally Posted by chadwick4eva

I'm saying that the percentage of high quality, thoughtful posts here relative to the whole used to be higher than what it is now. I always knew I could come in and feel like I was learning something from someone who had superior insight or expertise in an area or field I did not- whether that was gaining a better understanding of a company I had never heard of, looking at some fundamental trends over time in an obscure small cap, global macroeconomic trends, learning about a new drug or medical device therapy in the pipeline and the safety/efficacy data coming out of clinical trials, etc.

I know what blackberry post you're talking about- it was great and very thoughtful! But it seems like things have regressed a bit in the past 1-2 months from where they were.

i agree with you on that, this is just what happens when fomo hits and people that wouldn't normally get into stocks start flooding in. i think it'll eventually go back to normal and i'm hoping it does as well. i can't even go to wsb anymore because its just all spam. this thread kind of blew up in the last few weeks as well. just gotta stick it out. i think these volatile meme stocks will have a huge correction soon and we'll be back to a more "normal" market

[dmash]

Originally Posted by sokoloka

Sign of the times and a signal of the peak for me. Every rando I know has started hitting me up about STONKS and that's when it's time to get cash ready to deploy.

When the people who’ve never invested a penny start finally ‘taking the plunge’ it’s when the big boys get ready to start cashing in.

This is crypto 2017 all over again.

[asloper6001]

I think we are all getting tangled up in the many different ways people can invest. The current plays are simply momentum swings and considered a momentum play. The bubble is clearly there, but that doesn't mean everyone assesses the same risk as someone else might. 7sins might cover his ass with puts while I go all in blind. You can't compare us as the same because we chat in the same room. (What's happening now via Reddit)

There are so many ways to trade and look at things. I think everyone should look at face value what every one posts and their motives. It might be for you it might not. The bubble argument and paint a broad brush for everyone to invest the same is just wrong.


Its like politics you can argue growth stocks all day. The optimistic will say look at Tesla and the pessimistic will say overvalued look at the fundamentals like they have for last god knows how long.

Just to be clear I would like this stage to be behind us bc it is stressful on the overall market, but lets not lose sense as to why we are all here. This market makes everyone question themselves and what everyone else thinks enough already.

Just my .02. We will get through this and have a clearer picture soon. The market needs some internal reconstruction, how long that takes who the hell knows. Lets not kill each other during this time.

[JParm]

Originally Posted by asloper6001

I think we are all getting tangled in the many ways different way people can invest. The current plays are simply momentum swings and considered a momentum play. The bubble is clearly there, but that doesn't mean everyone assesses the same risk as someone else might. 7sins might cover his ass with puts while I go all in blind. You can't compare us as the same because we chat in the same room. (What's happening now)

There are so many ways to trade and look at things. I think everyone should look at face value what every one posts and their motives. It might be for you it might not. The bubble argument and paint a broad brush for everyone to invest the same is just wrong.


Its like politics you can argue growth stocks all day. The optimistic will say look at Tesla and the pessimistic will say overvalued look at the fundamentals like they have for last god knows how long.

Just to be clear I would like this stage to be behind us bc it is stressful on the overall market, but lets not lose sense as to why we are all here. This market makes everyone question themselves and what everyone else thinks is right as it is.

Just my .02. We will get through this and have a clearer picture soon. The market needs some internal reconstruction, how long that takes who the hell knows. Lets not kill each other during this time.

Well said.

[LA-RealEstateAgent]

Originally Posted by AshCashEmAll

“Stocks only go up”


Sent from my iPhone using Tapatalk

Thats been the story of 2021

[jltait]

Originally Posted by dmash

When the people who’ve never invested a penny start finally ‘taking the plunge’ it’s when the big boys get ready to start cashing in.

This is crypto 2017 all over again.

True that. Have been in stocks for a good long while, but sold my first option ever today. Covered call seems like a good way to start. The madness!