Monthly Archives: March 2021

Death to $AMC

The movie theater company AMC has been hit hard because of the pandemic for over a year now. The company is bleeding cash because people are not going out to watch movies and AMC still has to pay the rent. AMC has 620 theaters in the United States and 358 theaters in Europe. Also, AMC majority shareholder is Wanda Group out of China. Although, the company, over all is not doing well, it’s stock price is higher than normal because of its meme stock status.

Credit: The Investor Channel

AMC’s meme status has had garnered a lot publicity since the beginning of the year. A hashtag on Twitter began to trend and raised the stock price higher. In the last 52 weeks, AMC has had some extreme volatility for a company that is almost in bankruptcy. The lowest price was $1.91 and as high of $20.36! AMC used these swings to pay off some it’s debt in the tune of 1.2 billion, but it is still roughly 5.7 billion in debt.

I jumped on the AMCs bandwagon at the downswing of it’s epic rise and ended up being a bag holder. It was a valid lesson for me because emotional stock trading always ends in a loss. It’s like the old saying goes, “Bulls make money, Bears make money, but the pigs get slaughtered.” My investment strategy was that I had none and I was trying to jump into something at the wrong time. Although, I did lose a bit in my first round with AMC, I actually reinvested in put options to try to regain some ground. It worked and I got some of my investment back. I guess, I did not learn my lesson quickly because I jumped back in with 15 put options contracts with a strike price of 10.50. The stock price went stagnant on me and the price have been hovering in that range all week. Stay Tuned!

Is AMC going to come back? What are you thoughts? Drop a line in the comments!

Enjoying the $RIDE

Growing up in the rust belt, the automotive industry dominated the landscape. Everyone I knew worked at a manufacturing plant making some part or another. I have personally worked at several plants. One manufacturing plant I worked at made catalytic converters for Jeeps, and another created engine cradles for Honda Accords. It was labor intensive while working in a really hot plant, but it was good to have a job with decent pay. Manufacturing jobs have been leaving the Midwest and the auto corridor for a quite some time and the once booming towns have been depressed and dilapidated.

Credit: Business Journal Daily

Enter the new Lordstown Motors Company (LMC) in Lordstown, Ohio. Lordstown is a soon to be electric truck manufacturer that is partnering with General Motors to create the first full size pickup truck! The company bought the old plant that was used to produce the Chevy Volt and with the GM partnership will revitalize an area of Ohio to become Voltage Valley. GM also plans to build a massive battery factory next to the LMC plant. I am rooting for this partnership and company to succeed, because, not only is the product awesome, but it benefits my home state, OH-IO!

LMC has had some negative publicity when a hedge fund released a report criticizing the number of preorders for the new truck. Hindenburg Research is a short seller that capitalizes on the down fall of companies for a profit. Although, they did have a point that pre-orders are non-binding and customers can cancel the orders whenever they want. Tesla has done the same thing with their new Cyber Truck that can be preordered for $100 deposit. LMC copied their model, but is now in hot water with the SEC. I believe Lordstown Motors has a more appealing truck than Tesla, but building EV’s is not an easy feat. Tesla struggled for years to make the Model 3 as available as it is today.

Credit: TipRanks

I like the stock and I like the company. I purchased several call options right before the Hindenburg report came out and the stock plummeted from roughly 18 dollars a share to a little under $12 today. I took a hit early, but I still have some time before the expiration date! I plan to purchase actual shares in the company because I believe in their mission and the location of skilled auto workers in Ohio! How do you feel about this company? Do you believe it could help revitalize American manufacturing? Would you buy the stock?

Get him to the Greeks

The greeks are option metrics that traders use to better understand or try to predict how the market will change. Basically, they measure sensitivity and these are used to understand that. Options prices fluctuate differently than the stock price. There are times that a stock can rise, but the option price is stagnated. To me that can be frustrating, but one must realize that the option market is a whole other animal compared to the normal buying and selling stocks.

Credit: Robin Hood

The five Greeks above all have different meanings and measure different metrics of the options contract. Being new to options trading these have been hard for myself to understand and the main one I pay attention to is Theta because the rate of decay for option. Long options will slowly lose value over time just by the rate of decay. The rate of decay continues all the way until maturity and is a negative number. My current strategy is to do short plays with quick expiration dates, because every time I do a long play, I end up losing a high percentage of my original investment

Credit: Thomas Mann

Gamma measures the rate of change and a gamma squeeze happens when the underlying stock price rapidly goes up in the short period of time. This is what happened with $GME that shot the price up from 5 to 400 dollars a share. Gamma squeezes increase volatility rapidly and the stock could be halted from trading to slow it down. What option Greek(s) you do use for you analysis? How does that affect your strategy for buying and selling options?

In the 💰, out of the ðŸ’¸

One of the more interesting and hard concepts to learn is the concept of the strike price of the option. The strike price is the price for which you can sell the underlying stock. For instance, if you buy an option, the strike price is the price you are able to buy the stock at if you exercise the contract. Conservative investors usually will buy the option with the strike price very similar to the stock price, but riskier investors will set the strike price above or below the price of the stock. A strike price that is beyond the price of the stock could make the options contracts higher or lower depending if it’s a call or put strategy.

In the money refers to any strike price that is above the normal market price of the underlying asset. Whereas, out of the money is strike price below the market price of the stock. Being in the money is great when you are dealing with call options because you want the value of your option to increase as the stock increase. Put options are similar but opposite. In the money refers to the price of the stock going below the strike price of the option.

Out of the money options are usually cheaper because the option is more risky. For instance, a stock is valued at 100 dollars and you buy call options with as strike price of $105. It seems crazy to buy an option higher than strike, but if you think that the stock price will climb higher than 105, you could certainly make some profit off of the contract!

I have been playing around with these concepts and lost some money and acquired some gains along the way. Last night, $PTON stock price took a decent drop because of some tragic news about their product. I decided to jump into and buy 5 contracts with a in the money strike price of $104 for about .85 cents a contract. When the morning came, Peloton’s stock shot back up to close to $107! I profited about 900 bucks on that risky investment. The expiration of the contract was the same day! What are some of the more risky investments have you done and how well has that worked?

Evil Shorts

Short sellers are investors that bet or speculate that a stock will lose value. Short selling has its advantages like hedging against a stock, but the short sellers mission is wanting to see the company’s stock price fall and make a profit. It’s a backwards game that can be hard to predict. Another risky bet from short selling is a short squeeze! Short squeeze is when borrows shares and immediately sells them, hoping to buy them back later. The squeeze happens when there are very little shares to buy back at the same price so the short seller has to buy the stocks back at a higher price and take a loss. Buying the shares back at a higher prices raises the value of the stock and thus starting the drive to an astronomical price!

Credit: The Plain Bagel

A short squeeze is how the Gamestop stock shot up from 5 dollars a share to roughly 400! Investors from the Reddit community created a FOMO around the stock and retail investors bought up the stock and created a viral trend. As the stock started to rise and the hedge funds started to lose, the momentum of the stock shot up into the atmosphere! Gamestop is not the first massive short squeeze to happen, but not too long ago this same thing happened to Volkswagen during the Great Recession.

Hedge funds like Melvin Capital have become the villians in the Gamestop short squeeze because of their shear monetary power and their overall agenda to make a company lose value. Hedge funds can have a good side too; believe it or not. The funds will do massive research into a company to see if the organization is giving false data to investors and the S.E.C. A good recent example is Hindenburg Research noticed that Lordstown Motors Corp told investors they had more that 100,000 preorders for their new truck, but it turns out that statement was not entirely accurate. What is your opinion on hedge funds? Are they the greed we all depict when we think of Wall Street?

F.O.M.O.

Exciting stocks like the new IPO $RBLX has investors scrambling to buy stock as the price continued to rise for a few days. The stock initially was valued at 45 dollars a share and quickly jumped to $64.50. Investors see this type of quick rise and begin to get a sense of FOMO or “fear of missing out.” FOMO in investing can be dangerous because an investor could jump in at a price that is not reflective of reality. Jumping in a the top of the hype will leave investors with only one way to go and that is down. The GME craze left a lot of bag holders, but if they held on for a while GME is back up to $276 as of today!

Credit: Laura Wagg

AMC was a great example of FOMO that I had mistakenly jumped into at a very high number. I bought in at 12 dollar a share hoping it would climb, but soon as I did that the price fell to the floor. At one point, AMC shares dropped below 6 dollars a share which is half of my position gone in unrealized losses. The anxiety part kicks in because I knew that AMC stock was all hype and basically worth around 1 cent, according to Richard Greenfield. The price eventually jumped to almost 8 bucks a share and I unloaded the position, losing roughly 30% of my investment.

Ironically, as of today the share price from AMC is hovering around 11 dollars! A couple of lessons I learned from my AMC experience is 1) FOMO will ultimately end up in a loss 2) Paper hands will result in a loss too. If I held AMC with diamond hands, I would be on track to at least breaking even on a bad investment, but I got nervous and sold. Rational thinking would suggest that I made the correct decision given the fact that AMC stock is almost worthless. What experiences have you had with FOMO and investing? How did that experience change your strategy?

Ride the Wave

Investing in the stock market is an emotional roller coaster sort of like gambling. One minute you are high on the hog and next minute you are getting slaughtered. June of 2020, a 20 year old investor by the name of Alexander E. Kearns committed suicide because his investing portfolio show a negative balance of $730,000. Although, it was a glitch in the software and he really did not owe this much, the emotion toll of seeing so much red had an extreme impact on his psyche, and he opted to take his own life. He left a note on his computer saying, “How was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?.”

Losing any amount of money can be troublesome but losing $730k on a margin account would be absolutely devastating to a vast majority of retail investors. The emotional toll on losing money does not have to be that extreme if the investor only invests money they can afford to lose. Investing on margin is really risky business. Not only can you lose the money and owe a lot to a brokerage, but you also owe interest on the amount that you borrow! That will add up quickly. My rule of thumb, since I am a newbie, is to only “gamble” with money that is extra.

Credit: FLORDSKI

My investments have been on the down slope even as the market has hit an all-time high! The Dow Jones close over 32000 point on 03/10/21. The market jitters of the inflation risk was shaken off, but that still does not explain why my stocks have dropped. $LAC or Lithium America’s Corp was riding around 17 dollars a share when I decided to jump in and now is must have corrected to around 15 dollars a share. I had high hopes for this Canadian company that mine locally in Nevada. My first round of options expires on 03/19 so hopefully I start seeing some green or I might be in the depression part of the cycle of emotions. How do you feel about the risk of inflation? Do you think it will affect the overall economy?

Ups and Downs

The stock market can be like a roller coaster with modest climbs and steep drops! Today was a great example of that because the market has been dropping over the last few days, but when the Federal Reserve Chairman, Jerome Powell said there will be increased inflation upon recovery, stocks tumbled quickly. The market can rise or fall for many reasons, but impactful news can be a culprit too. Government reports on how the economy is going is another way to move markets. Usually, the jobs report would be a great way to move the market and I believe stock would have been boosted because the United States added over 379k new jobs in February.

I fared very poorly over the past week and I even tried to be strategic! I bought call options in $LAC or Lithium Americas Corp with a decent strike price of 15 dollars which was way below the price when the market opened yesterday. Although, today with the news of inflation my options loss really fast and did not recover. $LAC started the week hovering close to 20 dollars a share then slide one point to almost 13 dollars a share! That’s some pretty extreme volatility. $LAC is a solid lithium mining company that has mines in Nevada and that’s why I felt some attachment to the company. I know the stock will rebound, but it hurts to see a bunch of unrealized losses.

Ironically, I ordered a put option for $AMC the theater company that has been mostly closed due the pandemic. AMC has been in the news a lot recently because it became a meme stock for the redditors to try and take to the moon. Most people know that AMC is not profitable right now and has been bleeding cash because of their unused properties. The put options has a strike price at $8 and AMC literally has been hovering close to that for weeks! My theory is that people are still excited by this stock and are holding on to incase it make reach some unrealistic gains in the foreseeable future. I have a expiration date on my option as of March 19th. I’m hoping there is a massive sell off of this particular stock and I come out ahead! It’s not looking too good so far. How will you predict the market will go into the next week? Please leave a comment in the box below!

$LAC Chart – 03/05/21

Purchasing Stock and Options

You have researched a company, funded your brokerage account, and now you have to learn how to buy stocks and stock options! Stocks are the easier of the two to understand and to purchase. A stock is basically a very small ownership stack in a public company. You can buy 1 share of stock and be a minimal owner because publicly traded companies issue millions of shares. Companies sell millions of shares of stock through an initial public offering (IPO) to raise money for investment and growth.

Stocks are bought and sold very easily through your brokerage account such as the Robinhood app or through traditional means such as a stock broker. Brokerage apps give retail investors the power to buy and sell quickly without high commission costs or trade fees. E*Trade is the brokerage app I use, and is a little more complicated that Robinhood, but less boomerish than TD Ameritrade. To buy a stock the buyer has to know the stock ticker which is usually a few letters that represents the company’s name. GameStop’s ticker symbol is GME, whereas Apple’s ticker is AAPL. There are a few options to buying a stock, but the most common is to buy at market rate or at limit. Market rate is buying the stock at the current real time price and limit is setting a purchase price on the stock and hoping that the market price reaches your desired limit.

Options are a whole other animal to figure out and it generally reserved for the seasoned trader. Option are contracts that are bought and sold with the ability to buy a stock at a specific price anytime during the duration of the option ownership. Also, 1 option represents one hundred shares of that company’s stock at the specific price. The stock price in the contract is called the strike price. If you desire to exercise your contract you get the stock at the strike price. Another nuance of the option is you have to set the option expiration date. An investor cannot keep the contract forever, but must sell the contract, exercise the right to buy the shares, or simply let the contract expire. Option contracts are usually cheaper to buy than actually owning the stock, although there are opportunities to make more money quicker or lose money faster! Also, options are just contracts, whereas stocks are actual assets that can be held for very long periods of time.

Are you a stock trader, options trader, or both? What strategy do you have to make income? Feel free to comment and let me know what you think!

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