A VC: Getting The Fill (aka buying on the way down)
andyswan
· 1 year ago
SELL PUTS!!! It's extremely easy:
1. Pick your "I'd like to buy there" price 2. Go to the options chain in your broker and click on the chain that expires next calendar month (in this case, DEC) 3. SELL TO OPEN the puts with a strike price closest to your price from #1 above (divide number of shares you want by 100 to determine how many puts to sell)
On the third Sunday of the month, you will either have:
1. Bought your stock at the price you wanted, PLUS kept the premium for the puts you sold (essentially lowering your buy price by TEN PERCENT in the case of $GOOG
OR
2. The stock isn't below your buy price and you just keep the premium for the puts you sold (approx $30/share in the case of $GOOG $300 strikes)
Make 10% profit or own the stock at a 10% discount to where you wanted it anyway.
SWEEEEEEET!!!
TMC2K
· 1 year ago
EXACTLY!
I wondering why Fred goes thru this explanation when he could be selling puts. For someone with deep pockets this is a good strategy. There's another huge advantage to selling puts right now. Premiums are very high due to volatility. We are coming down from all time highs in volatility. As the market bottoms (a big assumption), volatility will go lower. You will make money as the value of the premiums erodes. It's better to be on the sell side of options right now.
Do what andyswan says. Sell some puts on these stocks, your strike price should be below yesterday's low.
Worst case scenario, you own goog or aapl below yesterday's (11/13) close.
Kevin
· 1 year ago
Ditto -- this kind of options 'trading' is way LESS risky than putting in a buy order at a lower price. Beating the dead horse, the volatility has the premiums so high, it's a fantastic time to do this.
I buy stock (almost) exclusively this way.
fredwilson
· 1 year ago
I hope my readers read these comments about selling puts in a bear market. It sure seems like a smart way to invest right now
SamJacobs
· 1 year ago
I totally agree with you about the analysts. My employer doesn't let us trade individual securities but I saw GOOG at 290 yesterday and was wishing I could buy. When Jim Cramer said GOOG was going to 750 it was time to short and when Henry Blodget says it's going to 200 it's time to buy. They are a reflection of market sentiment, not its predictor.
Brian
· 1 year ago
SCOR below $10 sounds like a bargain.
Thoughts?
fredwilson
· 1 year ago
i own a ton of it and am very biased. yes, i think its cheap, very cheap. but it might be better to ask someone who doesn't own as much as i do.
Brian
· 1 year ago
Thanks.
I am also very biased having worked for the company and knowing Magid's and Gian's track record.
steveplace
· 1 year ago
I'm pretty sure there's a study out there proving that analysts significantly lag the markets.
Oh yeah, you could just sell puts as well to help reduce your average cost. But you knew that already.
MassMan
· 1 year ago
I totally agree as long as you have sufficient capital reserves and the patience and discipline to see it through.
MassMan
"The market can stay irrational longer than you can stay solvent." - John Maynard Keynes
Aruni
· 1 year ago
Well Google has been annoying me lately with their requirement to put everything through gmail. I avoided having a gmail account until last month and now everythnig I've used on Google (AdSense, Analytics, Adwords, Feedburner) is now requiring I use that gmail email address which I just set up because I had to in order to add someone to my Analytics account! But hey, I'm sure one of the mutual funds I own has invested in Google and as you said all of our funds our down but since we are on an asset builder plan, we are buying low right now!
Michael F. Martin
· 1 year ago
All true, but there are other good companies out there that can be had at prices less than half their annual revenue.
fredwilson
· 1 year ago
i don't think revenue multiples are useful. the issue for me is what is the cash flow multiple.
daryn
· 1 year ago
I also got my share of fills this week; $AMZN @ 43 and $GOOG @ 299. I have a lot of faith in both companies, and comfortable with a long ride.
On the other hand, I have several other stocks in consumer/retail companies (two that had particularly off weeks are $APP and $WFMI), and even at 30-50% discounts, I'm not sure I'm ready to buy in to lower my average cost quite yet..
fredwilson
· 1 year ago
You have to have serious conviction to be buying for a hold in this market
Tony Choo
· 1 year ago
i think this price isn't lowest price. i like $AMZN .. i will continue wait & see
Investor rules
· 1 year ago
Investors can gain information about the brokerage services that a particular website has to offer by reading the quotes and the testimonials of the broker. It is important to note the experience of the broker and whether the broker has the adequate license of providing brokerage services.
Avrom
· 1 year ago
I have a proposal for a refinement of the cynics view you mentioned.
Analysts as a group (of course there are exceptions) are indeed great at 'predicting what just happened'. However, this is not helpful predicting how low things are going to go. Just because analysts are belatedly downgrading doesn't mean it won't go much lower, it just means they have already started going down.
The most serious market shocks only happened in the last month or two and results already look bad - look at the retail sales in October.... The question is whether analysts are bearish enough right now.
It will be truly amazing if Google is able to grow next year. Think about all of the companies who will be closing or massively slashing their marketing budgets. I would love to hear from Adwords users reading this blog to hear if they are increasing or decreasing their keywords bids or their daily budgets. It's probably safe to assume that everyone is taking a very close look at how much customers are really worth and how they can reduce the cost of customer acquisition. Google may perform better on a relative basis but I would suggest that any revenue growth at all next year is probably VERY optimistic right now.
What if the final shoe to drop is not when analysts turn negative (which is just a reflection that things are already bad) but when blogs like this give up trying to predict what is a good price to buy stocks at.
All Comments
1. Pick your "I'd like to buy there" price
2. Go to the options chain in your broker and click on the chain that expires next calendar month (in this case, DEC)
3. SELL TO OPEN the puts with a strike price closest to your price from #1 above (divide number of shares you want by 100 to determine how many puts to sell)
On the third Sunday of the month, you will either have:
1. Bought your stock at the price you wanted, PLUS kept the premium for the puts you sold (essentially lowering your buy price by TEN PERCENT in the case of $GOOG
OR
2. The stock isn't below your buy price and you just keep the premium for the puts you sold (approx $30/share in the case of $GOOG $300 strikes)
Make 10% profit or own the stock at a 10% discount to where you wanted it anyway.
SWEEEEEEET!!!
I wondering why Fred goes thru this explanation when he could be selling puts. For someone with deep pockets this is a good strategy. There's another huge advantage to selling puts right now. Premiums are very high due to volatility. We are coming down from all time highs in volatility. As the market bottoms (a big assumption), volatility will go lower. You will make money as the value of the premiums erodes. It's better to be on the sell side of options right now.
Do what andyswan says. Sell some puts on these stocks, your strike price should be below yesterday's low.
Worst case scenario, you own goog or aapl below yesterday's (11/13) close.
I buy stock (almost) exclusively this way.
Thoughts?
I am also very biased having worked for the company and knowing Magid's and Gian's track record.
Oh yeah, you could just sell puts as well to help reduce your average cost. But you knew that already.
MassMan
"The market can stay irrational longer than you can stay solvent."
- John Maynard Keynes
On the other hand, I have several other stocks in consumer/retail companies (two that had particularly off weeks are $APP and $WFMI), and even at 30-50% discounts, I'm not sure I'm ready to buy in to lower my average cost quite yet..
Analysts as a group (of course there are exceptions) are indeed great at 'predicting what just happened'. However, this is not helpful predicting how low things are going to go. Just because analysts are belatedly downgrading doesn't mean it won't go much lower, it just means they have already started going down.
The most serious market shocks only happened in the last month or two and results already look bad - look at the retail sales in October.... The question is whether analysts are bearish enough right now.
It will be truly amazing if Google is able to grow next year. Think about all of the companies who will be closing or massively slashing their marketing budgets. I would love to hear from Adwords users reading this blog to hear if they are increasing or decreasing their keywords bids or their daily budgets. It's probably safe to assume that everyone is taking a very close look at how much customers are really worth and how they can reduce the cost of customer acquisition. Google may perform better on a relative basis but I would suggest that any revenue growth at all next year is probably VERY optimistic right now.
What if the final shoe to drop is not when analysts turn negative (which is just a reflection that things are already bad) but when blogs like this give up trying to predict what is a good price to buy stocks at.