Yes!! So like most things -- the key is to get in BEFORE it takes off and get the heck out before it drops faster than you can say SELL...


Ever watch the movie "Trading places"?



I'd made up my mind last night that I was going to take a nice gain -- regardless if I missed another 10 points higher -- I was happy with what I had and that's it. So I was up an hour and a half before the market ever opened and sold on the open. If you're UP 45 points -- do you really care if it's down to only 41 points... You shouldn't ----- that's where people get crossed up! It's called GREED. We're not trying to be greedy -- we're just trying to make money. Big difference. It's an attitude - and ya gotta have your head in the right place.

Greg, that is so funny you say that about Trading Places, i got my family to watch it last nite for the first time. I worked at the theatre's when it came out and its always been one of my favorites.....

But, can you put it to me in laymans terms what went on at the end, I get the "fixes" the Dukes where trying to do (get a peak at the orange crop, which i;m sure was altered by Valentine and Winthorp)

So Dukes instructed their buyer to "gobble" it all up in the a.m., buy low, hold for a minute or longer(much)...sell high...

But "HOW" did V and Winthorp make out? I saw at the end they were either buying or selling rather calmly and slowly...if they "shorted" the stock, how'd they do it....i'm missing something

I just never got twitter. I just never felt they had a good way for advertising revenue. I think the stock will go down like Facebook did and once they show they can make money off of advertising it will go up.
I got some Facebook at $33 and at $26. Hopefully it keeps going up.

So with "FUTURES" --- you're buying the ABILITY to purchase "X" at "X" price... some time in the "future".... The Dukes had paid to see a sneak peek at the report... Winthrop and Valentine got the "peek" that should have been delivered to the Dukes --- and altered it and mislead the Duke boys. So they thought there was going to be a SHORTAGE of Oranges.... and were buying "ahead" of the actual news (illegal to say the least)... THEY ran the price to the moon trying to "corner" the market.... Winthrop and Valentine were SELLING at the PEAK of the market.... and then bought when the market crashed and went low ----- Very much like a short.... they sold delivery of the commodity at high prices (but they really didn't own the commodity) -- and in order to deliver at those high prices (the buyer at the high price MUST take the goods or resell or whatever) Valentine and Winthrop BOUGHT the futures at low prices -- therefore making the "spread" between the low and the high.

The Dukes BOUGHT all the way up ---- then they were unable to sell since the market was closed and therefore had to come up with the cash for their purchases.



So ---- In the STOCK MARKET --- if you SELL a naked short (meaning you borrowed the stock from the brokerage house and sold it) you get the cash in your account ------ say you shorted 100 shares of Apple for $550 a share. The brokerage would deposit $55,000 cash into your account --- but they'd also show a MINUS 100 shares of AAPLE in your account.... and at some point you must buy that 100 shares to clear up your short. Obviously you'd be trying to SELL HIGH and BUY LOW.... so you're hoping (betting/gambling) that APPLE was going to go LOWER than where you sold it short. And if successful - you'd pocket the difference.


COMMODITIES are like this ---- so let's say you're a huge user of PORK BELLIES.... you use 100,000 pounds per month... you might have a professional 'trader' buy pork belly futures for you so you could control - or try to control - your cost -- out 6 months or a year. Airlines buy FUEL this way etc. They "TRY" to hedge their costs by betting which way prices are going to go. Sometimes this is great - sometimes it's just like any other bet - it goes against you and you loose.

The key to much of this is that you don't ever actually have to take the commodity you're betting on. Much like they don't mail you a stock certificate... so you could "bet" fuel prices were going higher by this summer --- and buy fuel futures now at X price for June "delivery" --- but maybe they go even higher as June approaches -- and you resell your "contract" to someone else that actually wants that fuel --- or maybe it goes to another speculator....

Commodities are best left to the pros.... as this is a very specific "knowledge" base.

SHORTING is nothing but gambling --- and I never do it -- even though I THINK about "I should" do this because I "just know" (a gut feeling) that X company is going to suck. Well --- about the time you THINK you know this -- and short the hell out of X company -- some other company comes in and makes a huge order that bails them out - and the stock goes sky high ---- or some other company folds up and your company gets all the business ---- or some competitor offers to buy the whole thing for X (which is $10 a share higher than where you shorted it!!). It takes a huge amount of research to be a successful short seller. It's too much work -- and why bet that someone is going to suck --- I'd rather bet that "X" is going to do well -- and for me -- it's an easier "guess" than who is going sour.

There is also "shorting against the box" -- which is selling a stock short against stock you already own... at least that way if the bet goes against you - you know what you're cost is because you already bought the shares you shorted - so you can replace the shorted shares with the ones you have. I've done this a couple of times -- then I thought --- why bother --- I've added stress to my life and for what? If I think the company is going to suck - and I own the shares and need cash -- why don't I just sell now and move on. DONE.

So let's say you shorted TWITTER yesterday -- you sold 100 shares SHORT.. pick up 66,000 in your account --- and you replaced them today when you bought them at the end of the trading day for $56 -- you'd have made 10 a share for your effort. But what if you got greedy and didn't "cover" -- or you got busy and forgot to "cover" -- and monday they start back up and keep going up 3 and 4 bucks a day? When do you cover now? DO you wait for that magic misstep or do you just watch the shares shoot to 100... In other words "how much pain are you willing to accept"? UGH! Not for me -- no sir.

BETTER LUCKY THAN SMART is my favorite saying!!!

Thanx for the explanation Greg, i knew most of it and i'm still a little foggy on the "spread". But, yeah, i can see where a "specialist" has to do this in futures, just way too many variables for us in the "not know"....which is also why i dont really invest in tech, too much too know and the game changes to fast for me (and i grew up "programming" computers, could'nt grasp the logic)...

I need the "KISS" philosophy....and thats all there is to it.

Saw Peter Lynch on Bloomberg two weeks back, man i like that guy and the way he thinks....

My first investments were based on the Peter Lynch "theory" --- I still use his version to this day and it's never let me down.

I have posted here before that "money" chases "return" -- and it's my belief (and history bares this out) that there is no unused pile of money just sitting around waiting to be put to work. Rather --- for one asset class to rise --- another must fall ---- because that is where the money is coming from to make the other rise.

Found this paragraph in another article discussing the recent rise in the 10 year treasury bill.



The average interest rate for a 30-year fixed-rate mortgage rose to 4.48% this week from 4.47% last week and 3.35% a year ago, according to Freddie Mac.

Investors have sold Treasury bonds en masse this year to seek higher returns in stocks and riskier fixed-income assets. Through November, U.S. bond funds targeting Treasury debt suffered a net outflow of $40.2 billion in 2013, according to data provider Morningstar Inc.

In contrast, funds that invest in low-rated "junk bonds" issued by U.S. companies have attracted $2.6 billion from investors. (because they pay a higher rate of return!) <I added this>

Treasury bonds are on track to suffer their biggest annual loss since 2009, according to Barclays PLC.

So.... here's the funny part about the statement above.


The author states that people have SOLD bonds en masse.... so that they could invest in riskier assets. REALLY!!!


What happens when people SELL EN MASSE?? Doesn't make any difference if they're selling BONDS or STOCKS or HOUSES.... PRICES FALL...... When there's more sellers than buyers.

So now try to convince me why the author (and anyone else you talk to that supposedly knows all about money) thinks that BONDS are less risky to own.

That my friends is complete nonsense! If you own something and it is SUBJECT to going down -- that is taking a risk isn't it? So my whole deal against bonds is that they pay LESS THAN market rates (for the type we're discussing here - government issued super "safe" Treasury and Muni bonds) ----- and they go down and continue to go down in a rising rate market. That isn't safe -- and the only way to get your money back IN FULL --- is to hold the bond until maturity. That could be 10 or 30 years!! So for the entire time you've held that super safe bond --- and collected the below market rate of return... for what -- ZERO potential of capital growth (so inflation is kicking your butt as well!). The only way you can make money owning bonds is if the rate on your bond is ABOVE market rates. Given the timeframe of the maturity of the bond -- you MUST KNOW that interest rates are going to go up and or down during that period.... so aren't you just gambling that by buying a bond that pays X rate for X years -- that at some point the market rate is going to be LESS that what your bond pays and you will have a capital gain? UGH --- safe? I don't think so. You have two forces working against you -- time -- which is inflation... and the interest rate market.

SPREAD = difference of what you paid and what you sell for. It could be minus or positive.

So you bought for $1 and sold for $2 -- the spread was $1. Normally this would be called gain... but when you're buying futures -- etc - the term changes to "the spread" because it is moving and variable and it isn't a "gain" (or loss) until the contract closes for you.