Last month I discussed selling options against positions when the markets are high and everyone is happy. The markets can do anything on a minute by minute basis; still, they tend to stay within certain ranges from month to month — even if those ranges are hard to predict. As with all investing, you need to estimate the odds of a certain event happening and invest your portfolio accordingly.

As a general rule of thumb, I expect the markets to drop swiftly and climb slowly. That's precisely why I don't like selling puts against my positions.

Continue Reading Don't PUT Yourself In A Position To Lose ››

Late last week, the FCC approved Tribune Company to own print and broadcast media in the same market. Why was this important? Tribune Company (TRB) is going private and the FCC approval was critical to this transaction. Without FCC approval, the deal might not have gone through. With that hurdle out of the way, what's to stop it now?

And how can we make money from it?

Continue Reading Use Arbitrage! The Tribune Company Example ››

When you sell stock short, you are essentially selling the stock today with the hopes of buying it back at a later date — and a lower price. We know that price follows value; still, management can do a lot to mess with the company's stock price and screw up your short position.

On a short position, your potential gains are fixed and your opportunity for loss is variable. Not a good way to make money. Let's look at a play that could go very bad.

Continue Reading Don't Go Short On Overpriced Companies! ››

Last week was a wild one for stock prices. The Dow lost 4.1% (threatening 13,000); the S&P 500 was down 3.7%; the NASDAQ lost 6.5%. It was crazy enough to make most investors quake in their boots.

I don't try to predict the direction of the markets on a daily basis; still, I hate to lose money. That's precisely why I like to sell options from time to time.

Continue Reading When People Are Happy, Protect Your Portfolio ››