Hot answers tagged

46

By buying put options for the stock. A put option gives you a time-limited right to sell a stock for a specific price. Even if the actual price of the stock is below that price at the moment. This can be used as an insurance against an unexpected price drop, because it puts a maximum on how much money you can lose. But: The put options cost you money, no ...


36

Say you buy 25% of a corn field, and the other 75% is owned by others that decide how to operate the whole field (for this metaphor, assume the shares of the corn field are highly liquid and can be traded at "fair" value at any time). Every year, that field produces corn that is then sold for a profit. The majority owner can do two things with those profits: ...


20

When you buy an option, the premium is a "sunk cost". There's no way to get that premium back. You have to hope that either the option appreciates in value so you can sell it, or that the profit at expiry is enough to cover the upfront cost. If you now have an option that's basically worthless, you have two options: keep it and chalk it up to a lesson ...


19

How to protect your investment in such situations? By diversifying. If a company whose stock you own goes bankrupt, and it's a problem for you, your stock portfolio is not diversified well enough. In fact, I would argue you should be prepared for as many as 2-3 companies whose stocks you own going bankrupt. By understanding into what you invest. If you ...


13

Why do so many investors agree to pay now huge sums of money (trillions in total) for something that may eventually pay dividends, and even in the best case, these dividends are typically only a fraction of the price you paid to acquire these stocks? The average annual dividend rate for the US stock market is 2%. That means if you bought 100 million ...


7

It's possible that what you are seeing is a market-on-close order (MOC). These are often used by: ETFs who are adjusting a price imbalance b/t share price and value Mutual funds who are raising or freeing up cash due to purchases or redemptions Day traders who want to be flat at the end of the day


6

As I wrote in another answer, minority shareholders have the right to resell their shares to another investor (e.g., one who may be accumulating a controlling stake in the company). This works out so that shares are generally valued as if they were an entitlement to profits, because in the long run this is the basis of their value. That is, if smaller ...


6

Trendlines are arbitrary lines subjectively placed on a chart which can be interpreted in a variety of ways. Much of their success comes from hindsight resulting in accurate predictions because you know what the future will be. Technical analysis indicators provide information like support and resistance, trend, current momentum but they are a reflection ...


5

@D Stanley spelled out the possibilities for your trade. Unless lightning strikes, this position is a goner. A useful adjustment to be aware of for a losing position is the Long Call Repair Strategy. In short, you convert the long call to a vertical, lowering the break even point. IMO, it should be done if you can do this for no additional cost. The ...


5

When Kirkland decides to buy Detour Gold with shares, Kirkland is essentially giving up ownership to a portion of itself over to Detour Gold. Kirkland isn't giving up ownership. They're purchasing Detour and Detour shareholders will receive some number of Kirkland shares (and possibly some cash) in return, most likely at a premium to what Detour was ...


5

Endowment manager here. Investing works. Really. If you think it doesn't, that's a knowledge gap. We'll close it. Now, investments earn money one of three ways: interest (on investments such as bonds or loans), dividends (on stocks), and capital gains (the increased value of the thing.) If Ford stock went from $8.10 to $8.80 in the last year, that ...


5

Regulatory restrictions? Yes. You should read more about fractional reserve banking. Banks lend away the money people have deposited into the bank to yield interest. However, sometimes many depositors at the same time want to withdraw their deposits, and if the bank has invested 100% of the money into long-term loans lent to borrowers, the bank is unable ...


5

When talking about stocks, we sometimes like to pretend that the prices are completely rational and entirely related to the intrinsic value of the stock. The fact of the matter is that this is not true. In reality, stock prices are affected by human psychology (and human-designed algorithms). If a stock repeatedly approaches a particular price before ...


4

Because banking customers wouldn't be happy if their "safe" deposits lost value. Bank's aren't in the business of investing their money - they are in the business of providing a "safe" place for people to park cash. Investing that cash in the volatile stock market would not be in their customers' best interest.


4

Some, like me, find long time technical analysis as we see here about as relevant as horoscopes or i ching or other ways to do predictions. There seems to be several camps of thought about this, I guess I am a ”fundamentalist”.


4

You can buy inflation-protected securities in some countries. In the US they're called Treasury Inflation-Protected Securities or TIPS. In the UK they're called inflation-linked GILTs. With these securities, the principal amount increases by the level of "inflation", typically measured as a change in the Consumer Price Index (CPI). Unfortunately they don't ...


4

The classic answer to that dilemma comes from Will Rogers: "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it." More practical ways of reducing losses are stop loss orders and options.


4

The shares bought in your first 3 transactions were all sold on Apr 15th for a gain of $67 (+40 +18 +9). If you were to sell the 5 shares bought on May 5th for a loss in less than 31 days after the purchase made on May 10th, that would create a wash sale violation. Selling them now would not.. But that's not what you asked. You could sell the ...


3

Other than some optimistic news from the company, what data can be researched to raise the probability of an outcome that can say the price will rebound and will go above $35. Easy. The fundamentals. If the stock P/E ratio is let's say 2.5, and the company is in a sustainable and growing business and does not have heavy debt, you can be almost certain that ...


3

If the stock isn't included in the index, there is no direct connection between the stock price and the index value. Even if the stock is part of the index there is again no direct relationship between the index and the stock price. In the case of the Dow Jones Industrial average which is made up of 30 different companies, there are many days where the ...


3

From what I can tell, as of writing, Kirkland has a share price around $42 and a market capitalization of around $8.8B, implying around 200M outstanding shares ($8.8B/$42, rounded to one significant figure; I'm getting the share price an market cap from different sources, so I'm not confident that they're reflecting the same exact point in time), with the ...


3

iShares Core MSCI World is not an index. It is an ETF which is tied to an index, the MSCI World index. When you want to invest in that index, buying shares from each of the companies would be an option, but a quite complicated one. In order to avoid this hassle, iShares (resp. BlackRock) takes this burden away from you (and thousands of other people). They ...


3

You have several good answers already, but I feel there are two important factors worth mentioning, which haven't been brought up yet. Firstly, your assertion about investing as a majority shareholder in a single company seems to be based on this belief: You can guarantee your own payback. That's simply not true, in nearly any kind of investment. ...


3

A public company does not need a majority approval from share holders to do a secondary offering. Note that there are two types of secondary offerings. From Investopedia, What Is a Secondary Offering? A secondary offering is the sale of new or closely held shares by a company that has already made an initial public offering (IPO). There are two ...


3

The stock market is an auction with buyers and sellers looking to acquire different amounts of stock at any given moment in time. If there is a net excess of buying volume, price rises. If there is a net excess of selling volume, price declines. When buying and selling is in equilibrium, price does not change. It's simply a tug of war between supply ...


2

The technical answer to you question involves the Synthetic Triangle: There are six basic synthetic positions: Synthetic Long Stock = Long Call + Short Put Synthetic Short Stock = Short Call + Long Put Synthetic Long Call = Long Stock + Long Put Synthetic Short Call = Short Stock + Short Put Synthetic Short Put = Short Call + Long Stock ...


2

In the US, banks do invest in the stock market sometimes - just like they lend money to people sometimes. However, they can only invest or lend some of their money, and they have to be very careful with the risk profiles of their investments and loans. They have to keep a certain amount of money as cash; thus, in Europe's case, the ECB. This article for ...


2

Because stocks are only safe over very long-term periods. The bank has to prepare for the market to potentially downturn - significantly. And it needs to guarantee it retains enough cash value in its investments to cover all potential withdrawals. Not 100% of them, necessarily; but a prudent enough reserve that they meet the qualifications of the ...


2

In the U.S. settlement for equities is T+2 or two business days. There is no limit to how many day trades you can make in a cash account as long as you use settled funds. If you have $10k of settled cash, you could make one $10k day trade today with or if you want, ten $1k trades. Either way, you cannot trade those funds until two days from now. The ...


2

The SEC requires that Large Traders report trades to the SEC on Form 13H. A large trader is defined as someone who transacts: 2 million or more shares or $20 million in a NMS security during any one day 20 million shares or $200 million during any calendar month. The SEC also requires that "shareholders who acquire more than 5% of the outstanding ...


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