“Gambling” in the stock market, my personal experience. - FreeEconHelp.com, Learning Economics... Solved!

9/12/11

“Gambling” in the stock market, my personal experience.


This post is a little different from normal posts, but since I haven't gotten any questions recently, I wanted to share some of my experiences in the stock market.

Lately I have been dabbling in the stock market trying to find good deals on stocks that I can sell options on.  When I first started I needed to find stocks that were pretty cheap because it is necessary to buy 100 shares of the stock in order to sell options on it.  I bought shares of Sprint right before the market collapsed earlier this year (august 5th) and lost about 33% of my investment in a week.  I was a little frustrated but not too much because I wrote off the loss as a learning experience.  

However, what I did do during this time is more research.  I started looking at companies related to Sprint and I noticed this stock called Clearwire which was going down every day for about four months.  I thought to myself that this stock could rebound, and considered buying at $2.00, then $1.80, and finally again when it dropped to its low of $1.30.  This is an example of a penny stock, because it is trading at a value under $5.00 per share.  I considered buying this whole time, but I was nervous because I wasn’t sure if it would go under or not.  

Finally I decided that I wouldn’t invest, but would just watch it to see what would happen.  And as you can guess, the stock got a new CEO who invested about $4 million of his own money in the company and it shot to over $3.00 a share within a week.  Now this isn’t normal, but if I were to have invested in this top penny stock, I would have more than doubled my money.  The thing to remember is that opportunities like this are always occurring, so don’t feel like you have to invest in every stock you have a good feeling about.  It is just as likely for the stock to go down, or out of business so be careful.

When analyzing good potential stock candidates look for solid fundamentals.  Clearwire was a decent candidate because it had loads of assets that could be sold off in an emergency to keep from going out of business.  If you are new to investing I recommend you check out the SEC (security and exchange commission) website or the CBOE (Chicago Board Options Exchange) if you are interested in options.  There are also many websites that offer investment advice, and if you are interested in top penny stocks, Timothy Sykes has a webpage that goes over the dos and don’ts have penny stock investment with some free video lessons to boot.

Remember that any investment is risky, no returns are guaranteed, and it is always wise to paper trade (don’t use real money) for a few months to see how you fare before you gamble real money.

Disclaimer: This author currently owns 100 shares of Sprint, and zero shares of Clearwire, no actions will be taken to change these positions in the next 72 hours.

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