Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 0

One problem that I have, and this is a general problem rather than one specific to RAX, is the idea that a "small miss" can cause major problems in the short term.  I have never quite understood the reason that such small increments can cause such large responses.

It depends on the type of company.  A small miss on a solid low PE play won't make much difference in the long run.  It is more important to watch when concerning high PE strong growth momentum plays.  Once the traders/institutions start to get a wiff of a miss there they dump hard.

Mary if your gut says the stock fell more than it should but you are still concerned about pulling the trigger I can give you an alternative play.  Sell a far out put. January 2015 $60 one looks interesting. Offer is around $11.40 at the moment. 

Worse case come January 2015 you have to buy the stock for $60 (but you received $11.40 making your real cost $49.60).  If you like it here at $59 I have to believe you would love it at $49.  On the other hand if the stock does keep going up at least you made $11.40.  If the stock is selling under $49 and you still have faith you can roll out the put by selling an eventual 2016 and use the proceeds to close out the 2015 one.You do need as margin account to do this.

Main danger is if the company goes BK since then there are no option chains to keep stretching out.  A lesson I learned with ATPG ;/  So make sure the balance sheet is solid and no serious debt.

- Andy

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.