{"id":17,"date":"2010-04-21T14:25:08","date_gmt":"2010-04-21T14:25:08","guid":{"rendered":"http:\/\/www.cheapiv.com\/?p=17"},"modified":"2010-04-21T15:08:54","modified_gmt":"2010-04-21T15:08:54","slug":"buy-low-sell-high","status":"publish","type":"post","link":"http:\/\/www.cheapiv.com\/?p=17","title":{"rendered":"Buy Low Sell High"},"content":{"rendered":"

\"\"<\/a>This is the one of the oldest stock market phrases that is repeated without ever truly understanding it.\u00c2\u00a0 Brokers will repeat it to their customers and traders use it to joke around.\u00c2\u00a0 On the most basic core level it is the terms for the average person that when you buy anything of value you want it to increase in value so that you can sell it at a higher price than you purchased it for.\u00c2\u00a0 This is the “objective” for most investment assets.\u00c2\u00a0 Some\u00c2\u00a0 assets are depreciating assets in that the value decreases over time..your average automobile.\u00c2\u00a0 Once you drive it off the lot it depreciates or loses value.\u00c2\u00a0 Every extra mile it should theoretically lose value.\u00c2\u00a0 Other assets like your home fluctuate in price with the market.\u00c2\u00a0 Your home can be considered a depreciating asset but at a much slower pace.\u00c2\u00a0 The life of a house depends on the construction quality, weather and maintenance.\u00c2\u00a0 The price of the house will increase or decrease with supply and demand.\u00c2\u00a0 The higher the demand the higher the price.\u00c2\u00a0 The less supply the higher the price.\u00c2\u00a0 We are seeing higher supply these days so prices are dropping.\u00c2\u00a0 The economy has been in poor shape, so there is a lack of demand, so this is also forcing prices lower.\u00c2\u00a0 So as the supply and demand increase and decrease so does the home prices.<\/p>\n

The supply and demand factor has the same effect on the stock market.\u00c2\u00a0 People buy and sell shares of a company based on the idea that the company will make money and supply a dividend or reinvest in the company itself making it worth more.\u00c2\u00a0 Every stock moves up and down and is often correlated to the overall market.\u00c2\u00a0 So when the broader market increases then the stock increases.\u00c2\u00a0 There are too many forces to go into on what drives a stock price but the basic concept is that it does increase and decrease in price.\u00c2\u00a0 When we talk about buying low and selling high we talk about buying when the stock is at a low price and obviously selling when it is high.\u00c2\u00a0 The fact is that this is what makes the market what it is.\u00c2\u00a0 Who is to say today that your favorite stock is low in price and in position to buy?<\/p>\n

Fundamental analysts will tell you based on research that the stock is over\/under or fairly priced.\u00c2\u00a0 They use balance sheets, earnings, dividends, competitor analysis, and industry analysis, etc.\u00c2\u00a0 Technical analysis will use the history of the stock plotted on a chart to see where the stock is in relation to itself in the past.\u00c2\u00a0 There is no exact right answer or formula for knowing when it is the right time to buy…thus the market.<\/p>\n

If you buy low and it does lower what do you do?\u00c2\u00a0 If it goes higher and you fail to sell, what do you do?\u00c2\u00a0 These are basic questions of money management but things that every investor trader needs to reconcile before they get into an investment.<\/p>\n

I use sound fundamental companies and then use several technical analysis indicators to help me find stocks that I think are undervalued or under priced.\u00c2\u00a0 Valued is fundamental and priced is technical. \u00c2\u00a0\u00c2\u00a0 I then use options to take advantage of the movement that I think the stock is going to have.\u00c2\u00a0 There is the buy low sell high characteristic here as well.\u00c2\u00a0 You should never buy over priced options (high implied volatility) unless you are extremely confident in your stock target.\u00c2\u00a0 You are ideally buying cheap low priced options (low implied volatility).\u00c2\u00a0 Unfortunately, this is not always the case.\u00c2\u00a0 Often times we have to buy options at fair value(mid volatility levels) in order to take advantage of the stock opportunity.\u00c2\u00a0 The best case scenario is finding a good stock opportunity with cheap options( low implied volatility).<\/p>\n

The true power of options allows you to trade in both directions.\u00c2\u00a0 You can make money if the stock goes up or down or both with the right strategy.\u00c2\u00a0 So combining the direction and the cheap options allows you to both buy low or sell high.\u00c2\u00a0 This is why most brokers don’t get this simple saying.\u00c2\u00a0 I think there is so much more to it.\u00c2\u00a0 As a option investor\/trader we have the ability to buy low and sell high.\u00c2\u00a0 The vast majority of brokers do not understand options let alone recommend them.\u00c2\u00a0 Options are a little complicated to learn, but once you do it opens a whole new world of opportunity.<\/p>\n","protected":false},"excerpt":{"rendered":"

This is the one of the oldest stock market phrases that is repeated without ever truly understanding it.\u00c2\u00a0 Brokers will repeat it to their customers and traders use it to joke around.\u00c2\u00a0 On the most basic core level it is the terms for the average person that when you buy anything of value you want […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[7,11,8,9,10],"class_list":["post-17","post","type-post","status-publish","format-standard","hentry","category-educational","tag-buy-low-sell-high","tag-implied-volatility","tag-options","tag-stocks","tag-volatility"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts\/17","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=17"}],"version-history":[{"count":0,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts\/17\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}