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Skullcandy, Inc. Message Board

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  • coreylynnh@sbcglobal.net coreylynnh Dec 20, 2012 12:32 PM Flag

    Is this stock broken?

    "But this 50/50 condition is irrespective of strategy."

    I don't agree, it makes a significant difference of the strategy and your next statement ("So no matter how you look at it, it comes down to picking a bias, bullish, bearish, or sideways; the last case requiring an option strategy.") contradicts it. If you are bullish your strategy is different than if you are bearish or sideways. In any investment you need to weigh risk with reward. The bias greatly influences the risk part of this equation. Then a good investor will develop a contingency plan in case the assumed risk or reward did not come true (i.e. you mentioned putting a stop loss limit).

    We are very different investors. You are more short-term oriented than I am and side much more with technicals which I almost exclusively disregard. Not that one way or the other is right but just the outlook on things are very different. I can see how technicals are important to a shorter-term investor. I look for the long-term and therefore fundamentals are very important to me. Not just the snapshot today, but the past, present, and projected future. You mention the price will dictate the fundamentals. That may be partially true in a growth stock like SKUL and especially a heavily manipulated one like SKUL, but that is generally not true with stocks that have a greater amount of shareholders or much larger market caps. Stocks can be like chemistry or physics whereby assumptions hold true in certain ranges or situations but not all of them.

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    • coreylynnh,

      I like to get your input regarding options. I have almost 5000 shares in my account that I can sell calls or puts using my shares. I sold puts last time and I had to buy it back with some lost (double lost). I saw your note regarding selling calls and puts. What would you if you had these shares and want to sell options? Thanks.

      • 2 Replies to nahid666p
      • coreylynnh@sbcglobal.net coreylynnh Dec 20, 2012 11:28 PM Flag

        Since I don't know the price you acquired your shares, what your outlook on SKUL is, or whether you have a better place for your money I will just tell you my story because I cannot give you a recommendation without more info.

        I have always sold puts on well-established large companies with a strong history of maintaining or increasing dividends. I also look at fundamentals to see if I feel the stock is undervalued and if so then I will sell puts on it. Great times to take action usually occur when there are pullbacks due to news, such as earnings misses, where investors overreact and send the stock down to undervalued territory. I make money thanks to these panicked sellers. The earnings miss is not a game-changer, the stock will eventually go back up and hopefully I can sell a put that expires worthless. If the stock depreciates and I am put on the stock I am prepared to hold it knowing I bought it at a great price and have dividends to fall back on until it appreciates. Hopefully in the meantime I can sell some calls for nice premiums as well. For instance, this last month I made ~ 3.4% return on the money I invested on MSFT and INTC weekly puts. The premiums were generally 0.5-1.0%. I was actually put on each once during the past month but turned around and sold a weekly call for the same strike price as the put and received premiums of 0.5-1.0% as well. Both times the stock was called away after that week. I will have INTC 20 and 20.5 puts and MSFT 26.5 puts expiring tomorrow likely OTM which is great. A short (about 90-100 pages) and simple book which explains this strategy is "Beating Wall Street 1% at a Time"by KJ Finn which I bought for $9.99 on my amazon kindle. I recommend reading it.

      • coreylynnh@sbcglobal.net coreylynnh Dec 20, 2012 11:27 PM Flag

        I replied but again it never showed up. Here goes again:

        Since I don't know the price you acquired your shares, what your outlook on SKUL is, or whether you have a better place for your money I will just tell you my story because I cannot give you a recommendation without more info.

        I have always sold puts on well-established large companies with a strong history of maintaining or increasing dividends. I also look at fundamentals to see if I feel the stock is undervalued and if so then I will sell puts on it. Great times to take action usually occur when there are pullbacks due to news, such as earnings misses, where investors overreact and send the stock down to undervalued territory. I make money thanks to these panicked sellers. The earnings miss is not a game-changer, the stock will eventually go back up and hopefully I can sell a put that expires worthless. If the stock depreciates and I am put on the stock I am prepared to hold it knowing I bought it at a great price and have dividends to fall back on until it appreciates. Hopefully in the meantime I can sell some calls for nice premiums as well. For instance, this last month I made ~ 3.4% return on the money I invested on MSFT and INTC weekly puts. The premiums were generally 0.5-1.0%. I was actually put on each once during the past month but turned around and sold a weekly call for the same strike price as the put and received premiums of 0.5-1.0% as well. Both times the stock was called away after that week. I will have INTC 20 and 20.5 puts and MSFT 26.5 puts expiring tomorrow likely OTM which is great. A short (about 90-100 pages) and simple book which explains this strategy is "Beating Wall Street 1% at a Time"by KJ Finn which I bought for $9.99 on my amazon kindle. I recommend reading it.

        SKUL is the second growth stock I have tried to use this strategy on because I am trying to diversify a bit. The bad part is that there are no dividends to fall back on. But the premiums are so juicy that I can lower my cost basis quite quickly. As I said earlier I sold the SKUL 11 put pre-earnings for a 5% premium, or 0.55/share when the stock was ~12.50. This lowered my cost basis to 10.45. I figured they would at least meet earnings expectations and the price would likely stay above 11 or probably no lower than 10 at which point I could sell a call for another great premium, or better yet the stock would stay above 11 and the put expire worthless for a 5% profit in one month. The risk/reward seemed very good. I was half right, unfortunately I would rather have been right about the price it went to. In hindsight I made a mistake with this stock. At the time I sold the 11 put there was a 1% premium on the 9 put and typically I look for 1% premiums. Why? Because 1% premiums will yield me a double-digit annualized return which is what I seek. I was too greedy. I should have sold the 9 put to really lower my initial cost basis OR waited for the earnings catalyst to pass and if the stock did fall due to panicked selling I could have sold a nice 6 or 7 put. In fact I could have increased my position by selling those 6 or 7 puts but I did not want to increase my exposure on SKUL, especially since I am still experimenting here. Had it been MSFT or INTC I would have likely increased my position. But I am not panicking because I still think there is a profit to be made. Meeting analyst expectations is not a game-changer in my opinion and therefore I am still bullish on this stock for the future. Its fundamentals are still really good compared to its industry. The P/E ratio, PEG ratio, P/B, P/S all scream undervalued although P/C is a worry. This lack of cash is not a great sign, but then again SKUL has no debt. I sold a Dec call for .20/share (1.8% premium) so my cost basis is currently 10.25. If I can sell another call for greater than .25 I can potentially sell subsequent calls at the 10 strike price but that could eat away profits due to the $1 drop in strike price. I will wait a week or two to see what the stock does and see if I can sell a Jan 11 call for .20 or more. If I can sell another 11 call and the stock appreciates above 11 then I make a very nice profit, somewhere around at least a 30% annualized return (I already have 6.8% from the put and call I already sold and after January this will be 3 months investing money in it). If the stock doesn't appreciate then I will take what call I can get and wait patiently. If the company continues to grow at such a good clip investors will eventually drive the stock back up to 11 or higher and likely within the next year. I will then take my profit when it hits 11 or above. The key is patience. If there is a game-changer I can always cut my losses and exit. They all cannot be winners. But I will be much better off than if I had bought the stock at 12.50 when I sold that initial put. Luckily I only have a small position on this stock because I am learning how, and if, my option strategy can be applied to growth stocks.

    • Well, what I was getting at, is when the market is NOT trending you need to have a bias to choose a strategy. We seem to agree.

      You misquoted/misinterpreted me. I did not say price "dictates" fundamentals. I said price action "tells" about upcoming changes in fundamentals; a distinctly different concept.

      Also, I am NOT just short term. Using technicals, or reading the tape, has nothing to do with time frame selection. I'm going to end this here, because you're not ready for me yet But think about this:

      If you had a $50 million account principally devoted to SKUL then how would trade it? You would have enough capital to manipulate price and so I don't think you would care about quarter to quarter or even year to year changes in fundamentals because since it would take you so long to get into and out of positions you would have to use your enormous capital to move the stock in accordance with YOUR plan and you would have the capital to do just that, damn the torpedoes. The reactions to fundamentals by the crowd would just be blips of noise in your world that you could easily manage.

      Now consider the home-gamer with a $50k SKUL-account. Does it make sense for him to base his trading decisions on fundamentals? Or should he follow the guy with the $50M account who 1) can't let fundamentals affect his plan and 2) has the capital to move the stock in the direction he wants? And if the answer is follow the money, then how would you do that?

      Price and volume.....reading the tape. Good luck but keep an open mind.

      • 1 Reply to onepoint272
      • coreylynnh@sbcglobal.net coreylynnh Dec 21, 2012 9:56 AM Flag

        I do understand where you are coming from and you may be successful doing it. That is great. For me, I will look to see where the stock will be in the long term. I don't want to have to be on watch daily with a stock and most retail investors do not have the time to do that either. I am open to your way of thinking, but I am not a full time trader so I don't have the time to look at technicals. Nor do I want to change course of what I am doing because it is very successful for me.

        Answer me this, if this company continues to grow at a very good clip, say 20% a year, will the stock price eventually move up? Fundamentals say yes, it will attract a whole bunch of investors. That $50M guy will have to react and change his plan. If those bunches of investors are longer-term oriented investors then the game finally changes. That is what I am more concerned about. Everything else is white noise. A sudden stock price drop because the company met earnings expectations is not a game changer in my opinion. Panic selling because of it is just handing your money to the $50M guy. I understand your position that you should sell on a SOW because that $50M guy has information we don't, but only if the company's growth will suffer with whatever news is out there. But will that news really be a game changer, or just another white noise news story that panics people? The stock price will have to eventually come back up if SKUL keeps growing at 20%+. That is what I am more concerned with. If I am wrong on the growth story, I will lose money. But I will have lost a lot less using my options strategy than if I had bought the stock at 12.50 when I sold my first put. I have already gained 6.8% in premiums in just 2 months time. If the stock ever goes back to 11, which it will if it continues to grow, I will easily eclipse my double digit annual return I am looking for. No need to panic, just need to be patient and wait for appreciation while watching for a potential game-changer.

    • What I was trying to get at, is the necessity of choosing a bias in a non-trending market in order to select a strategy. We obviously agree on that.

      You misinterpreted me somewhat on price "dictating" fundamentals. No, not "dictates". What I said in effect was that price action will TELL about changes in [perceived] fundamentals before those changes become public information because someone [the big players] knows before the dumb money [that would be you and me] is allowed to know. This is not a new perspective, ie., traders-of-old Jesse Livermore, Richard Wyckoff.

      For example, look at any long-term chart and where you see volume off the top, the result is always the same. Specifically, take SKUL. One look at the price bar and volume bar of September 13th, 2012 is more important than any and all the fundamental analysis you could ever do. That action, off-the-top-with-volume, made it crystal clear that the TR beginning months before it was a distribution trading range; the big money was getting out and getting short. And it made it clear that "LONGER TERM" ,not short term, further decline was coming. On October 5th it tested the top of Sept 13th and failed on lower volume.....see ya don't wanna be ya. I tried to short that retest and for many days following, but could not get shares.....the big money had them all tied up. Did the big money know something the public did not? Probably, either that or detailed fundamentals just don't matter because what really matters is how the big money intends to make money; in which direction are they intending to take the price. In either case then, what good is detailed fundamental analysis for the retail investor? Nada. Doesn't it make more sense to just follow the money?

      I realize what I'm saying is hard for a fundamental purist to take in. It goes against all they've ever heard or thought about in regards to markets, but keep an open mind. There will be an SOS or an SOW and it will accompany some notable news item but not until the big money is fully positioned. If it comes back into the range it means the funds and specs didn't pick up the baton and run with it and the big money will work the range a while longer and try again on the next notable news item or they will call CNBC and make or buy some news. The point is, most everyone will think the news, the fundamentals, is what moved the stock. No, not even close. The news is just a catalyst, something for the funds and specs to grab on to and believe in. The big players have the capital resources to move SKUL anytime they want. They have the capital to keep it contained in the trading range. But they won't move it out and let the funds and specs mark it up or down until they are fully positioned. Fundamentals have very little to do with this process in the context of months or even years. Think about it. If you had $50 million to play with SKUL how would you make a profit? Would you follow the fundamentals, watch Jim Cramer every night, and basically follow the retail herd? NO WAY. You'd have to get in slowly and get out slowly over long periods of time so you don't adversely affect price. You'd have to buy when the crowd is selling and sell when they are buying. You'd have to have a "LONG TERM" plan and let nothing, including those irritating changes in fundamentals, get in the way of its final execution.

      Finally, we may be different in our investment styles but that does not mean I am "short-term" oriented. The strategy is to accumulate shares at the low of the range and then sell some off at the top of the range and make a profit and then buy even more on the next trip to the bottom of the range. How is that short term? SKUL is in a trading range therefore that and a bullish bias is what dictates my strategy until the price and volume tell me it is going to break up or down and start a mark-up or mark-down phase, a trending phase. I'm just following the money.

    • What I was trying to get at, is the necessity of choosing a bias in a non-trending market in order to select a strategy. We obviously agree on that.

      You misinterpreted me somewhat on price "dictating" fundamentals. No, not "dictates". What I said in effect was that price action will TELL about changes in [perceived] fundamentals before those changes become public information because someone [the big players] knows before the dumb money [that would be you and me] is allowed to know. This is not a new perspective, ie., traders-of-old Jesse Livermore, Richard Wyckoff.

      For example, look at any long-term chart and where you see volume off the top, the result is always the same. Specifically, take SKUL. One look at the price bar and volume bar of September 13th, 2012 is more important than any and all the fundamental analysis you could ever do. That action, off-the-top-with-volume, made it crystal clear that the TR beginning months before it was a distribution trading range; the big money was getting out and getting short. And it made it clear that "LONGER TERM" ,not short term, further decline was coming. On October 5th it tested the top of Sept 13th and failed on lower volume.....see ya don't wanna be ya. I tried to short that retest and for many days following, but could not get shares.....the big money had them all tied up. Did the big money know something the public did not? Probably, either that or detailed fundamentals just don't matter because what really matters is how the big money intends to make money; in which direction are they intending to take the price. In either case then, what good is detailed fundamental analysis for the retail investor? Nada. Doesn't it make more sense to just follow the money?

      I realize what I'm saying is hard for a fundamental purist to take in. It goes against all they've ever heard or thought about in regards to markets, but keep an open mind. There will be an SOS or an SOW and it will accompany some notable news item but not until the big money is fully positioned. If it comes back into the range it means the funds and specs didn't pick up the baton and run with it and the big money will work the range a while longer and try again on the next notable news item or they will call CNBC and buy some news. The point is, most everyone will think the news, the fundamentals, is what moved the stock. No, not even close. The news is just a catalyst, something for the funds and specs to grab on to and believe in. The big players have the capital resources to move SKUL anytime they want. They have the capital to keep it contained in the trading range. But they won't move it out and let the funds and specs mark it up or mark it down until they are fully positioned. Fundamentals have very little to do with this process in the context of months or even years. Think about it. If you had $50 million to play with SKUL how would you make a profit? Would you follow the fundamentals, watch Jim Cramer every night, and basically follow the retail herd. NO WAY. You'd have to get in slowly and get out slowly over long periods of time so you don't adversely affect price. You'd have to buy when the crowd is selling and sell when they are buying. You'd have to have a "LONG TERM" plan and let nothing, including those pesky irritating changes in fundamentals get in the way of its final execution.

      Finally, we may be different in our investment styles but that does not mean I am "short-term" oriented. The strategy is to accumulate shares at the low of the range and then sell some off at the top of the range and make a profit and then buy even more on the next trip to the bottom of the range. How is that short term? SKUL is in a trading range therefore that and a bullish bias is what dictates my strategy until the price and volume tell me it is going to break up or down and start a mark-up or mark-down phase, a trending phase. I'm just following the money.

 
SKUL
6.32+0.01(+0.16%)Aug 31 4:00 PMEDT