There were no "reply" buttons on any of the posts on the old topic "farmerstoolshed = idiot"
So I am responding to Natasha here.
I haven't done a valuation and was trying to get some help from people here. So, I will either dive in for a trade on Friday or move on.
If the value of this stock is $4 or $24, what is the probability that it will hit either number in the short time of my trade?
"" I said you are wrong about "following". ""
I'm not wrong about following trades. My trades don't follow anyone else's trades. Only the Longs are stupid enough to do that.
And it's hilarious for you criticize me for worrying about your grammar on here while YOU are worried about my social life. So funny. Typical idiot GORO Long.
"" I never said you didn't understand the market. ""
Of course you didn't try to claim that. Everyone would know that such a claim is wrong.
I'm saying that I understand the market much better than you do.
"" Just basic English. ""
You really are stupid. I'm correcting YOUR English.
"" And I do have an ego and don't need to hope about YOUR physical disadvantages. ""
Yes, you are hoping that I'm physically ugly because I've embarrassed you intellectually.
And your ego is hurt by the idea of getting schooled by a 24 year old woman. 25 by the time you read this.
kinstodd, you seem like a nice person, and you are asking decent questions so I will take some time to give you a free stock market lesson. This is Natasha's continuing education series for the readers of the GORO message board.
"" If the value of this stock is $4 or $24, what is the probability that it will hit either number in the short time of my trade? ""
You shouldn't care if it actually hits those numbers. You should care about the direction that the stock goes. If XYZ stock is worth $4 and trading at $14, then it is more likely to trade downward over time. If XYZ stock is worth $24 and trading at $14, then it is more likely to trade upward over time.
How much time? Well, sometimes a very long time, and sometimes quickly. Think about a stock trading at $14 this way.
If it's worth $4, then picture a plastic bag blowing around in the wind. Sometimes it will blow upward, but there will be a tendency for it to fall bag to the ground over time.
If it's worth $24, then picture a helium balloon blowing around in the wind. Sometimes it will blow downward, but there will be a tendency for it to rise higher into the sky over time.
Sure, there is time to make money in the near-term as the updrafts and downdrafts blow both the plastic bags and helium balloons up and down. There is an entire practice dedicated to predicting the updrafts and downdrafts on stocks. This is known as Technical Analysis. This practice using historical trading charts and historical trading averages to try to predicted the direction of stocks in the near-term. The problem is that almost all Technical Analysis methods are inferior to the quantitative methods used by huge hedge funds that have employed armies of financial math PhDs that have developed incredibly sophisticated models. This means that these quant hedge funds will make money off of people like you trying to use simpleton TA methods.
Now, you said that you were going to base your trade on whether or not GORO closes up or down today. I guarantee you, this is an inferior TA methodology. It's nothing more than a guess. You might guess right, but you should really attempt to have a greater than 50% chance of being right when you purchase a stock (or make any type of bet). Having less than a 50% chance of being right means that you will lose money over time. Read the book Bringing Down the House for a deeper understanding of this concept.
"" I haven't done a valuation ""
You really should. Since you can't predict the near-term updrafts and downdrafts better than the quant funds, you should attempt to predict the movement of the stock in the long run. If it's a $4 stock (a plastic bag), then bet that gravity will pull it downward eventually. If it's a $24 stock (a helium balloon), then bet that it will rise eventually.
Now, it's a bad idea to value a resource company by applying a multiple on earnings or dividends. An oil well that's producing a lot of oil, profit, and dividends this year might run out of oil in a few years. It's best to figure out how much cash flow can be earned during the life of the oil well and discount those future cash flows back to the present. Likewise, it's best to figure out how much can be earned during the life of a sliver mine and discount those future cash flows back to the present.
Since the CEO's of oil companies are famous for making outrageously optimistic claims about the amount of oil that they have in the ground, they are usually required to get a third party, independent reserve report so that investors can accurately estimate the future cash flows. Likewise, CEO's of mines are famous for making outrageously optimistic claims about the amount of metal that they have in the ground, so they are usually required to get a third party, independent report. GORO published their report in April. It showed that GORO has much less sliver and gold than the CEO was claiming that it did. You can compare their report with the reports that other mines have released - AND you can compare the market caps of the mines to the amount of metal that they each have in the ground.
That is the first step. I hope this helps. Please let me know if you have any questions.
The stock was down today.
So, tomorrow I'm going short. But I don't think I'll short the stock because I don't want to pay a cost to borrow or pay the dividend. So, I am buying the March 20 puts or the March 17.50 puts or the March 15 puts. Or a combination of all of them. I'll invest about $5K or more..
"Since you can't predict the near-term updrafts and downdrafts better than the quant funds, you should attempt to predict the movement of the stock in the long run."
What a stupid statement, Natash. I consistently make money on TA-based trading. I don't have to be able to predict near-term stock movements better than the quant funds to be able to make money. You are so obsessed with quants that you refuse to see that a methodical approach to investing using regular TA analysis can be quite profitable.
Oh, and BTW, "near-term" for quants generally means timeframes in the milleseconds microseconds. You can do quite well in TA leveraging stopck movements across minutes, hours and days. There is plenty of profit to be had out there for anyone paying attention.
With the 6 cent dividend, the share price has collapsed, but if you believe this is the month that will all turn around, by all means, catch that falling sword. This board always enjoys the chance to watch another "smarter than the market" in action. Keep us posted.