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  1. Default Using dividends to predict price floor?

    I read random books now and then. One book came up called "Beating Wallstreet 1% at a time." (1% is his goal each month). In this book the author recommends looking at stable dividend stocks and using historical data to determine a price floor. In other words, he would look at the dividend yield at past lows in the stocks history. At what yield, did investors find that stock to be attractive enough to provide support. Then he'd see how the particular yield at a bottom compares with today's yield. If the yield at past lows was within 10-20% of the current yield, he would find that stock an attractive buy (he'd actually sell out of the money puts).

    Any thoughts? It would be interesting to see more people post discussions about books etc.

  2. Default

    Selling an out of the money put will give you a nice edge on notional plays. I think that is a more important strategy than how you come up with the notion.

    Example....if a stock is trading at 26.87 and you sell the 26 put for 1.10$ that gives you a 68% probability of profit (not losing money). Much better than just buying a stock which basically results in a 50/50 probability of profit.

    So ye...I think it's awesome. Come up with a reason to think something is going up....and sell a put. boom...you just put the odds in your favor.

  3. Default

    Imagine yourself driving your car and approaching a traffic signal at a four way intersection. As you approach the light is red so you tap your break to slow down and all of a sudden the light turns green and you proceed through without a problem. You do this day after day and the same things happens. The signal is first red and turns green just as you get closer. Months go by without any deviation, every day is exactly the same. One day you approach the signal and it is, of course, red but you're not worried because so many times in the past the light turned green as you approached so you're confident it will do so again. Instead of tapping your breaks to slow down you hit the gas expecting the usual outcome. Guess what, this time the light didn't turn green as you expected . You now sped through a red light and got t-boned by a semi traveling at 50mph. Ouch! You're dead!

  4. Default

    The moral of the story is that using historical data alone to predict anything could lead to a catastrophic outcome. Before putting you money to work be sure, as in the aforementioned analogy, you have a green light in the present.

  5. Default

    Sure, anyone can argue that making any prediction of the future is flawed. Nobody knows what will happen. However, the most we can do is put on trades which are based on some historically validated belief, even if irrational. It all depends what you consider to be a high probability setup.

 

 

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