Today I face the eternal conundrum I have with stocks priced like options.
When I buy one of these stocks for a couple of bucks a share, it seems like more often than not, the stock goes down. Take my little speculation on Citicorp from the 26th (last Tuesday). As usual, my $3.24 purchase price was too high within a couple of hours of making it.
The stock closed that day at $3.15, for an immediate loss of of several percentage points.
Today, that stock is trading at $3.38. One a one-week holding period, that’s 4.32% return, which annualizes to well over 200% per annum. Do I take the profit? It’s a huge percentage, but not a huge number.
The chart shows a lot of congestion around $3.50 a share, so if this upward move in price keeps going, I expect that zone will turn into a trading barrier that could survive weeks or even months.
Needless to say, if the double-dippers on the economy are right, what will drive the market down will be loss in confidence on consumer household finances, which will hurt C mightily.
If I don’t take profits, will I be sitting here a year from now wondering why I didn’t?
OK, I think I’ve got a solution. I’ll set the price to sell so that profits from my one week in the stock covers this month’s health insurance.
I used to think about work when I was a kid in terms of how much entertainment I could get in exchange for the work. Mowing a lawn or shoveling a driveway could pay for a movie and that overpriced popcorn and candy.
In my 20’s and 30’s, I thought in terms of extra work or income to cover going to concert or a professional ball game. By the time I was in my 40’s, I thought in terms of a vacation or a nice antique
I guess this is the AARP version.
Good luck to all. Feel free to comment on how you decide to take short-term profits.