Why is Porter Stansberry Worried about How We Sell Stocks?

The Stansberry Research 12th annual Alliance Conference took place recently in the Dominican Republic and was covered by Amber Lee Mason for the DailyWealth Trader. She reports that she talked and discussed with many important people in the field from Jim Rogers and Jim Rickards to Marty Fridson and others. The major take-away, however, for her came from Porter Stansberry.

During a panel discussion the topic of selling was raised and she explained that Porter Stansberry is concerned. As Mason explained, “when you make these trades, you’re signing up for only PART of the upside on the stock… but you’re exposed to ALL of the downside.”

Mason goes on to explain her interpretation of why Porter Stansberry is worried. She explains that some readers are selling options the wrong way and are going to lose a lot of money. As she explains,

When these ‘boom and bust’ stocks boom, they can rise hundreds of percent. When they bust, they can fall by half. Because these stocks are much more volatile than our ‘great businesses at good prices,’ these readers can collect much larger option premiums. They can easily find instant payouts of 10% or more… which would add up to huge annualized returns. But they’re still getting only PART of the upside… while exposing themselves to ALL of the downside. And these types of stocks have a LOT of downside.”

This, she explains, is why Mr. Stansberry is worried. He doesn’t want readers to hurt themselves or their pockets by selling options the wrong way. Mason urges her readers not to trade for income until they know what they are doing and that they are doing it the right way.

James Cannon

About James Cannon

James Cannon is an experienced hedge fund analyst. He has served on the advisory boards for various different Fortune 500 companies as well as serving as an adjunct professor of finance. James Cannon has written for a variety of Financial Magazines both on and off line. Contact James at james[at]businessdistrict.com