Sunday, 25 January 2009 23:00

How much knowledge and skill is needed to take advantage of the paid subscriber research?

I received the following question from a reader and thought that I would anonomously share it with the blog:

Reggie,

I have been reading your blog for many months now and am very impressed with your analysis and commentary.

I am thinking about subscribing to gain access to the actionable information.

What I need to know is how much detail is provided about how to actually take action on the data provided.

Will taking advantage of the information require that I be well versed in puts, calls and margin trading?

Thanks,
Blog reader and prospective paid subscriber.

___________________

My response:

Thanks for the complimentary words. What is well versed for one investor may be elementary for another - it is a rather subjective question. As stated in the last actionable post regarding JPM, all you really need is to take small incremental positions in the subject company and hold on until the valuation band is reached or until the investment thesis behind the position is proved wrong - whichever comes first. You will not always make money, but the key is to make money more often than you lose money.

I have created a book club (which I never finished populating, but will get to this year) which has books that detail all of the skills you need to take advantage of the research. The key is to read, discern, absorb, and learn. There is no shortcut, and you must be able to sort through the trash, but once you find a valuable nugget of info, you must be able to quickly internalize it and put it to use.

Keep in mind that this blog is now a full fledged community, and any subscriber can and should feel free to ask any relevant question through the comments section and/or the discussion boards. Remember, there is no such thing as a dumb question, only the only dumb action is not to ask the question when you know you are in doubt or don't know.

Sorry I couldn't give you a straight forward answer, but I would rather try and give you the truth than attempt to sell you a subscription. Cheers, and good luck.

Last modified on Sunday, 25 January 2009 23:00

9 comments

  • Comment Link rayshafie Tuesday, 27 January 2009 22:32 posted by rayshafie

    How do you approach the plays that do not offer leaps?
    do you short the stock and just wait?

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  • Comment Link Reggie Middleton Tuesday, 27 January 2009 02:22 posted by Reggie Middleton

    You are also right in not being too stingy to pay for excess time value, which you can always sell at a later date unless the company falls to zero (which means that the intrinsic value would have shot through the roof). You can also potentially take advantage of wide spreads through ratio writes, which essentially puts you in the market makers seat. Then again, you can simply short the stock and ignore the spread issue. Those who get hurt with margin calls either bit off more than they could chew or didn't use protection (ex. hedging via options or futures), or most likely a combination of both.

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  • Comment Link cube660 Monday, 26 January 2009 19:30 posted by cube660

    I agree with you shaunsnoll regarding the options premium. This why you should always try to buy leaps (in the money) where possible. More expensive?, yes. But a better method, for the basic buy and wait strategy. IMHO.

    This strategy for me, has paid in multiples. I make it a point to stay away from margin, unless shorting, which I rarely do. I buy enough contracts, so I can pay myself back my original investment amount, as the valuation target draws near, yet still be well vested with house money, to see the finality through. I did this with GGP and GS and it was something to behold.

    so for JPM, I am sitting on Jan 2010's and 11's. Most of which (70% of the position) in 2011. No worries about time decay which is the devil of options. This is [b]not[/b] investment advice, just my opinion.

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  • Comment Link jarret Monday, 26 January 2009 16:11 posted by jarret

    Thanks Reggie as I had forgotten about those.

    I think there is a real strong base of knowledge here as we all were smart enough to find Reggies research and the real smart ones subscribe to it.

    If we all start take advantage of the user groups it will be a benefit to us all.

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  • Comment Link Reggie Middleton Monday, 26 January 2009 15:57 posted by Reggie Middleton

    The groups already exist:
    [url=http://boombustblog.com/component/option,com_groupjive/Itemid,43/groupid,5/task,showgroup/]Individual investors[/url]
    [url=http://boombustblog.com/component/option,com_groupjive/Itemid,43/groupid,4/task,showgroup/]
    Institutional Investors[/url]
    [url=http://boombustblog.com/component/option,com_groupjive/Itemid,43/groupid,6/task,showgroup/]
    The Press[/url]

    I strongly recommend that all users of all levels take advantage of the user groups and the more robust discussion boards (as opposed to just this comments section) that allow you to post pics, graphs, sounds, videos, and spreadsheets. It will make the site a more communal place to be.

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  • Comment Link jarret Monday, 26 January 2009 15:51 posted by jarret

    I would be interested in creating a group where we could take Reggies great research and talk about potential investing strategies.

    Anyone else interested?

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  • Comment Link shaunsnoll Monday, 26 January 2009 12:49 posted by shaunsnoll

    there are other sites dedicated to that. investopedia is great, if you have specific questions the community here is more than happy to help.

    in response to the intial letter about skill required, buying options is tricky and you will need a very basic grasp of options markets and financial markets to trade them. however i bet that if you just went short with 5-10% of your portfolio, and kept at least 30% of the portfolio in cash, and same if/when reggie reccomends going long, that would work very well and require next to no skill at all. market makers will rip you off till you die in the options markets and its much more tricky than just buying selling due to implied volatiilty, time decay ,etc

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  • Comment Link Reggie Middleton Monday, 26 January 2009 12:31 posted by Reggie Middleton

    I recommend those who want definitions go to Wikipedia.com and investopedia.com, they are both good, in depth and investopedia will break things down in to plain English.

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  • Comment Link Rumi Monday, 26 January 2009 12:29 posted by Rumi

    One things that would help newbies a lot would be to have a glossary somewhere and hyperlink to them for acronyms and various terms (LTV, Texas Ratio, eyles, etc). Maybe it's too much work (esp since this site may not be geared for that kind of person anyway and it's pretty easy to look a lot of this stuff up online, I guess), but it'd make things easier and more complete.


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