How to Generate Income from Your Stocks

June 4, 2010 // 52 minutes

The Market Guys will show you how you may be able to create income from your stocks with options.

Investing Education Day

July 29, 2010 // Chicago, IL

PIN PRESSURE INDICATOR™

Using Pin Pressure as a leading indicator for setting price targets

AJ Monte, Chief Market Strategist for the Market Guys, has written a paper for the Market Technicians Association on the Topic of Pin Pressure.

This document was grounded in research conducted by the University of Illinois showing how Option Trading Volume affected the price of the underlying stock in which the option contracts where traded.

From this paper, AJ has developed the Pin Pressure Indicator™ which is a calculation that computes the combined open interest traded at various strike prices and uses this data to determine price targets for individual stocks as we approach options expiration Friday.

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0 Short Sale Question

This question comes to us from Justin C. this week:

Q:  My question is what happens when you are shorting a stock (aka Countrywide or Bear Stearns) and that stock goes to $0.  I wasn’t in the position when in went to zero but had been prior.  Would that be a good thing, or would you lose your money?  I would guess that your goal for any stock is to go to $0, theoretically.

A:  First of all, good trade!  We often discuss short selling in The Equity Oracle.  In a short sale, your maximum profit is when the stock goes to $0.  Think about what happens – you sell the stock short and collect the sales proceeds.  You are then obligated to buy the stock back to cover your short sale.  The less you can pay to buy the stock back, the better.  In actual practice, a stock won’t just drop to zero.  More often, it will languish in the penny stock range – perhaps a nickel or so – for months.  At that point, you have very little upside left so it would be best to cover your short for pennies on the dollar and find your next great trade!