The Seer
EOG Dedicated
If you own as little as $50,000 of stocks that resemble the DOW or S&P you can sell one December DOW or S&P futures contract, Here is how it works with a DOW;
You open up a commodities account and fund it with US Bonds or cash of at least $8000. You sell, meaning to go short, one contract of Dec DOW @ lets say 10,000 on a $5 per point contract. If you are worth more, there are bigger contracts and in other markets.
Good side. If the market goes down, you earn money at $5 (or $10) x DOW point down but your stocks lose value. You take your earning in Dec and sell March again to continue or decide if you want to take your profits and let the markets recover.
Bad side. The market goes up before Dec. You lose money on your short sale of the futures contract but your stocks go up. You then decide if your insurance should be continued or dropped. This is what happens if you buy fire insurance on your home but it does not burn down.
Why would you do this? If you sell your shares and have a capital gain, you will owe taxes. You will no longer get the dividends, If it is important to you, you cannot vote your shares.
Why is this better than just going short one DIA unit? When you are short a real stock like DIA trust, you must pay the dividends that the stocks would have earned. In DIA, this is big.
Why else might you do this?
You may have been watching the market and have seen the DOW hit 10,000 about three weeks ago where you said you would get out but then you did not pull the trigger and are still long. It hit 10,000 yesterday but fell back and you think it has made what is called a "double top" and will fall back again. You may be afraid that the bailed out bankers have used their TARP money to buy stocks, pushing up their value as they buy them from each other, instead of making loans. You may be afraid that the only reason people are investing here is the other countries are just worse.
You may think that all of this red ink is going to be a disaster and the market will fall until it hits the 4000 range. This is my personal prediction but the bankers with all the TARP money may continue to buy and push up the DOW so I do not know exactly where or when this will happen.
You may want to get out of stocks completely or put at least 5% of your money into gold, which has hit a triple top which in market parlance, "Triple tops never hold". Meaning gold will continue to go up.
You open up a commodities account and fund it with US Bonds or cash of at least $8000. You sell, meaning to go short, one contract of Dec DOW @ lets say 10,000 on a $5 per point contract. If you are worth more, there are bigger contracts and in other markets.
Good side. If the market goes down, you earn money at $5 (or $10) x DOW point down but your stocks lose value. You take your earning in Dec and sell March again to continue or decide if you want to take your profits and let the markets recover.
Bad side. The market goes up before Dec. You lose money on your short sale of the futures contract but your stocks go up. You then decide if your insurance should be continued or dropped. This is what happens if you buy fire insurance on your home but it does not burn down.
Why would you do this? If you sell your shares and have a capital gain, you will owe taxes. You will no longer get the dividends, If it is important to you, you cannot vote your shares.
Why is this better than just going short one DIA unit? When you are short a real stock like DIA trust, you must pay the dividends that the stocks would have earned. In DIA, this is big.
Why else might you do this?
You may have been watching the market and have seen the DOW hit 10,000 about three weeks ago where you said you would get out but then you did not pull the trigger and are still long. It hit 10,000 yesterday but fell back and you think it has made what is called a "double top" and will fall back again. You may be afraid that the bailed out bankers have used their TARP money to buy stocks, pushing up their value as they buy them from each other, instead of making loans. You may be afraid that the only reason people are investing here is the other countries are just worse.
You may think that all of this red ink is going to be a disaster and the market will fall until it hits the 4000 range. This is my personal prediction but the bankers with all the TARP money may continue to buy and push up the DOW so I do not know exactly where or when this will happen.
You may want to get out of stocks completely or put at least 5% of your money into gold, which has hit a triple top which in market parlance, "Triple tops never hold". Meaning gold will continue to go up.
