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Author: 1000 Big funky green star, 20000 posts Top Recommended Fools Feste Award Nominee! Coverage Fool Supernova Phoenix 1
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Subject: Re: Getting Paid While You Wait Date: 6/3/2003 3:53 PM
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Hi Naj,


That's actually 213% and 79.5%, but who's counting? If you like those returns, you should participate in the fx markets and make 10 times that in 1-3 months, shouldn't you?


Actually, I was not compounding but adding it as if I could have done it each month with the same amount. I don't believe you can compound this type of return. It is difficult to find situations each month and to do this with an increasing amount of money would make it that much tougher. But I did say annualized, so point taken.

And this is EXACTLY what I was afraid you were going to say.

You obviously think there is a downside. What do you see the downside to be to using this strategy?

My thoughts are the following;

I see a company I consider fair value. Normally that would mean buy it up. But let's say I am fully invested and need to bring in extra cash to expand my investment portfolio. I have enough to buy 100 shares of a company that I consider fair value, but it is a new position and I feel it would be to my advantage to lower my cost basis instead of buying outright? I choose to chance losing the investment as it rises and collect the premium which expands my cash account. Or I risk buying it but lower than it was presently. What is the downside?

tom
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