Here's a great post from trenchrat that follows along the line of the last few posts !! RegardsHarmyPS This is another board well worth following !!http://boards.fool.com/Message.asp?mid=16744846&recscode=2"The feeling of losing on a stock is not a good one. It is no fun losingmoney, particularly when we have to work hard to make the money in thefirst place. Many investors despise losing so much that it clouds theirvision and prevents them from winning in the stock market.Investing in stocks is a probability game. You can not expect to always beright, and when you are wrong, you have to crystallize the loss. If yourinvestment plan is to never take a loss, then you will quickly findyourself invested in a lot of losers, with little hope of finding aprofitable exit door.People dislike pain, and make a considerable effort to avoid it. Losingmoney is a form of pain, and many investors avoid the pain of losing in oneof two ways.First, they sell a winning position at the first sign of weakness, givingthe stock little room to give back some gains before resuming an up trend.Instead of playing to win, these investors play to avoid losing. And bychoosing this approach, the investor leaves a lot of missed profits on thetable. While they may still make a profit on the trade, they don't maximizetheir profit potential. And over time, the inevitable losses are greaterthan the gains because their gains are too small.Second, the investor avoids taking the loss, because selling a loser is toopainful. Soon, a small paper loss becomes a bigger paper loss. Eventually,the loss has to be crystallized, and it is often much larger than it shouldhave been if the investor had taken the loss when the market proved theinvestor wrong.To be a successful investor, you can not fear losses. You have to play towin, rather than to avoid losing. It is cheaper to take the loss when themarket proves you wrong, rather than avoid the pain of losing and letting asmall loss grow bigger. Losing is a part of the investment process, andshould be considered important to making money."
Harmy,thank you for the nice clear explanation on options, sounds a lot less scary than I thought. I think that puts calls and options have had a pretty bad press, people(like me) get spooked out of learning things before they look into them and make their own assesment I think the more tools in the toolbox the better, and certainly gives the ability to change strategy when necessary--I will be looking into it as soon as I get some other things sorted down the track a little. FC,
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