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|This bulletin was published on Sunday,
Feb 18, 01 just for you.
Past Weekly Bulletins
Five new Rollers hit the List this week. The letter “U” didn’t prove to be a lucrative character; just 2 of the 5 new stocks came from the family of U. The other three were sent in by some of our hard-charging members. 18 pooped-out, old Rollers were cast to the wayside.
If you’re the sort that likes to read other people’s email, this Update should really blow your skirt up. Many emails can be found at the bottom of this message… Yes, I’ve finally gotten caught up on the email! A couple of which are rather lengthy, but well worth the time it takes to read them.
The dates in front of some of our Listed Rollers are indicators for when the stock was put on the List. Since, dating the stocks just started, it’ll take a while before all of the stocks have a date in front of them. New stocks will all be dated as they come in, eventually, through attrition, all of the stocks will have a date.
For what it’s worth…
Here’s another penny stock that I’ve received umpteen alerts on, WLFO. It’s about .42 cents per share. There is supposedly a $5 Billion Dollar housing project involved. Wulf International LTD is listed as a Strong buy, with a sell target of $2.75- $3.25. Buyer beware…this is not a Rolling Stock. WLFO was mentioned here just for your information, to do with as you please.
Shorting/margin trading is a great way to make money. Instead of only turning a profit on a stock while it's rising you can also do well from its downward slide as well. Every so often, this topic gets kicked around and it always occurs to me that the process fits Rolling Stocks like a glove. I’d like to chime in with Ted Allrich about there being no limit to how much money you can lose though. Just like you can never be positive that a stock is going to go up after you buy it, neither can you be positive that its price will fall when you want it to.
This is Ted Allrich's explanation "Shorting” Stock: What You Have To Know
Shorting a stock sounds rather simple: you sell a stock you don't own in the hopes that it will go down in price. Then you buy it back at a profit. But it's not that simple, and there are a number of issues you have to understand about shorting, especially the costs involved.
First, a basic reminder on the mechanics: you can sell stock short on the New York Stock Exchange only on an uptick. That means you have to sell the stock when the price has moved up from the last trade. With NASDAQ stocks, you can short when the bid price has an uptick. All shorts must be done in a margin account.
Once you have a short established, there are several costs involved. One is the interest expense on the amount of margin you have borrowed to put on the short. Even though you have sold a stock and your account will show a cash balance, you will be charged regular margin interest on the cash balance. As an example, if you sell 100 shares of a $50 stock short, your initial margin will be $2500 (50% of the amount of the trade- you will have had to contribute the other $2500). You will be paying interest from day one of your trade until you close out the position.
Another cost occurs if the stock has a dividend. Because you have borrowed the stock from someone else when you sold it short, the person who bought the stock from you is expecting any dividend the company pays. The person from whom you borrowed the stock receives the regular dividend from the company so guess where the dividend comes from that goes to the person who bought your borrowed stock? That's right: you have to pay the dividend every quarter.
One more cost: no matter how long you keep your short outstanding, the gains made are always taxed as short term gains. So, even if you have a stock short for two years, when you cover it for a profit, you'll pay short-term income taxes. Of course, most shorts don't stay on for a long period, but this is a detail worth knowing if you keep a profitable position on for more than a year.
One last reminder about shorting stock: there is no limit to the losses you can incur. If you short the above stock at $50, it can go up forever. Most short sellers use Stop Orders to prevent this problem. A Stop Order for a short position is one that puts a price above the current level of trading so that when that price is hit, the short is bought back (covered). That limits your loss. Conversely, when you buy a stock, you have a loss limited to the amount of money you paid for the stock. If you short a stock, unless you buy it back, your losses will continue forever if the stock moves up and up and up.
Right now, some people believe shorting stocks is a good idea. The first quarter results will be poor. Even the second quarter is beginning to look suspect. But all of that information is already factored into most stocks. In other words, it's common knowledge and most investors are looking toward the second half of the year. That's always the case with stocks. They tend to reflect the future, not the present. So, while the current environment is looking slow, that has already been factored into most stocks. If you are still bearish on the second half of 2001, then you can make a case for shorting some stocks. But very few investors see this slowdown lasting more than another two quarters, especially if the Fed continues to lower interest rates. Shorting stock is a sophisticated, complicated trading idea. Make sure you're comfortable with all details about it before you trade. Your broker will have additional information about all the factors involved in shorting.
PS. I know this is nothing new to you, but I just wanted to share Ted's explanation. He always reduces things down to the simplest most digestible form!
Good Luck on your Trades!
If you'd like to view the past Weekly Bulletins, there are a variety of places to go. Take you're pick! You'll find they're easily accessible for your viewing at Delphi Forums, RS100's Premium Board, Yahoo! Clubs, MSN Clubs, The Motley Fool, Lycos Clubs, and The Raging Bull.
I know what your thinking... What idiot?! Would have seven different message boards for their web site and post the identical information on each!? Well the answer is simple...LLH that's who :-0) If you've read this far you're probably expecting to stumble upon my reasoning for this about now? So here it is: each of my message boards are located in popular "communities" catering primarily to the financially minded web surfer. When one of these investing voyagers of the net drift onto one of the RollingStock100 message boards, the inclination is to click over and check out the web site that's sponsoring it...namely this one, RollingStock100.com! It's just a method of attracting future members by giving them a trail of bread crumbs to follow.
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