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Wednesday, May 25, 2005

 

Transition time


Well graduation is done and we've gone from Philly to Dallas. Our home is supposed to be finished in July and work starts in August. Despite having 3 months "off", I think most of that time will be filled with lots of research and decision making: where to get a mortgage, what car to get (buy or lease? used or new? fun or practical?), which furniture to buy, which walls to paint, where to put rugs, and which mattress to look under to find the money to do so. The only thing I know conclusively is that I want a decent TV after using a 15-year old hand-me-down for years. Even if I'm watching it on a bare floor, I've got my heart set on a Samsung 46" DLP.

Although my "dream of doing nothing" (Office Space reference) is not close in sight, I can already feel the effects of not having any school/work stress. It's very freeing. I am already looking forward to having this feeling again at age 65... I can see it now... a nice little planned community in Florida with shuffleboard and golf carts.... not to play golf, just to get around without having to walk too much. I wonder if I'll still have the Samsung? By then HDTV channels may eventually be available in Boca Raton.

posted by Ryan : 6:13 PM | permalink

Wednesday, May 04, 2005

 

Options and trading


When I was 15, I went to Charles Schwab's Menlo Park office to open my first brokerage account (back when "discount" brokers only charged $70 or so per trade). Over the next couple of years, going against the admonishment of my parents, I made a regular practice of putting my eggs in one basket (mostly trading on a company called RasterOps). It took only a few lucky trades to get hooked. Since then I have not been able to yield completely to the wisdom of a "passively" managed portfolio. Index funds are great for the long haul, but life can become so dull without a little change on the side for day-trading.

During my first few weeks at Wharton, I toyed with the idea of doing Investment Management. Why not get paid to do it? But it didn't feel right... kind of like deciding to room with your best friend in college -- sounds great at the outset, but what happens when you just end up arguing over bills and dirty dishes? Sometimes you just don't want to screw a good thing up. So, in short, part-time trading remains a hobby and nothing more.

Lately I've had a bit more time to follow stocks and try a hand at options (calls only so far... no puts yet, although Qwest might be a good candidate for that). For the uninitiated, options can be a very highly leveraged way to invest. If you only have $1000 to play with, you can double it quite easily in a couple of weeks, which is tough to do with regular stocks. The problem is you can also lose it all in a couple of weeks, which is also quite tough to do with regular stocks.

So far options have not been that kind to me. I bought some Google calls back in March, but analyst Jordan Rohan single-handedly wiped me out with a completely unjustified downgrade. The market believed him just long enough for my options to expire. Then Rohan upgraded the stock again less than a month later. Whoops. But, as you can see from the articles, BusinessWeek and the rest of the business press gave Rohan a free ride. If I wrote for BusinessWeek, I would have at least thrown a barb in that last story calling into question the guy's credibility.

But, lame analysts aside, that's what you get when you buy options. The fact is, random stuff happens (right or wrong), and your options expire. It doesn't matter how right you are about a company, you have to be right about what the stock will do in the short term. You don't have the luxury of riding out a bad quarter, like you do with regular investing.

As a postscript, I had better luck with UnitedHealth calls last week and was able to make back some of that lost Google money, but I've learned my lesson -- options are not for the faint of heart. I think I'll leave the calls and puts to the hedge fund guys (and their cardiologists) to worry about.

posted by Ryan : 2:16 PM | permalink

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