Hypothetical Situation, maximizing profits

Discussion in 'Strategy Development' started by david666, Jul 25, 2010.

  1. Need a little advice....on this hypothetical situation.


    Say that you know Stock A is over bought and you are in the neighborhood of 80-90% sure that the stock will drop a minimum of 20% over the period of the next 2-4 months.

    Besides flat out shorting the stock, what other methods could be used to maximize profits? I am not very familiar with options, would this be the best method? Or is there another method?



    Appreciate the advice,


    David
     
  2. You definitely should get acquainted with options. Because if you are wrong, out right shorting can expose you to huge losses. Whereas, a well executed option strategy can limit losses if the trade goes against you.
     
  3. Aside from the fact that you do not know that it is overbought, you are entirely delusional in being 80-90% sure, as well as the incorrect assumptions on both min of 20% and the next 2-4 months,

    sorry, what was the question again? :confused:
     
  4. Again it was a hypothetical...I don't believe I asked if it realistic or not. Also, I didn't ask for advice concerning the strategy. It was a what if...as in what IF you know the assumptions I made were in fact true...what decisions would you make regarding trading the info?
     

  5. I have looked into options and considering the time frame is 2-4 months, I'd probably need to go at least 6 month in advance options...which seems to be very low on liquidty correct? Seems like double sword
     
  6. the decision would be since the entire strategy is flawed, that it would be ludicrous to trade it. Trading on speculation and belief in your crystal ball is how newbies trade. Try to keep up....
     
  7. Again, you are missing the point. I am making a gross exageration. I'm just asking the best methods to utilize if you believe a stock was going to fall or is due for a reversal. You are taking things too literal. Try to keep up
     
  8. tgere79

    tgere79

    Joe,

    Why don't you take it easy. This is a legitimate question. No need to be degrading/demeaning.

    David,

    I would agree that options would be the best way to take advantage of that situation.

    Trevor
     
  9. Thank you Trevor, nice to see someone who took this thread for what its worth. I appreciate it.
     
  10. tgere79

    tgere79

    David,

    No problem. I like to give people the benefit of the doubt and try to help when possible. Find it works out much better for all involved :)

    Trevor
     
    #10     Jul 26, 2010