University of South Carolina Libraries
Wedne Gettir Playing the stock as a recent USC ? ? a 1 sy 1 T pictures uy tari jt ANDY DLINN graduated from USC in August with a masters degree in mass communications, since then he has been sort of looking for a job. Sort of, because for the past two weeks Andy's been playing the stock market. He hasn't earned a fortune, but so far he's made enough to pay his rent and expenses for the next four months. Andy dabbles in options. The Stock investor Buy priv Instead of actually buying a particular stock he buys the option to buy someone's stock. The amount he must pay in the beginning, the premium, is much smaller than if he bought the stock, and while the risk is greater, so is the reward. "It's a feeling. Timing is w every uuug. xueie is nu objective reality. All the work amounts to what you feel the market is going to do," Andy explained as he studied the electronic board with the latest stock quotations rushing past at Merrill, Lynch, Pierce, Fenner x Smith Inc. in Columbia. His eyes rarely left the board as he talked, w/thy/' . . / / / /. . . ' ' [ . fP;v. ' ?w* ^ M&s :' J: y Stock market addict, / tii/it\/ n f hie c tr\nis e nt Stockholders must keep . stocks because changes c 4 f Vt ........... . ?>- ? - ssday's lg on tl ! market can be fun graduate has found iabcock. watching for the stock he pei had bought on option days before. litt If the stock coes down, hai money will be lost. But that me is the risk and the ex- / citement. nei "There are all kinds of ma indicators of the market, pla Business magazines, news ye< reports, digests, just los listening to what the other the people are saying about the ba market -- but in the end its a be< ii?^? ad( 1 r's creed: stc ha ate and k&ll public. we pl? t joi 0f feel. The more you do the bu better a feel you get, it An comes with experience." un Andy began investing in gr< stocks when he was in the Navy and had some extra v cash. He bought 100 shares of th McGraw-Hill publishing th company and shares in ga Virginia Electric and Power up Company. He still has the to McGraw stock but sold his shares in the power com- th pany when they began to lose se mnnpv nf a fatiltv Un nuciear plant. go However, so far Andy has made 16 percent on the money he invested. "But in that's nothing," he said, th Some people I know have sa made 200 to thousands of br I pi I ir bi I oi $&<$% ** $2 Bp* '" < <'. ; > ''>, * WlMWrrfMwHn ? ^ s \ndy Dlinn chocks the ac7 the teletype machine. j* a constant watch on their tj an occur at any time. tl Mk. he Dc and profitable, out. Story and rcents on their money. 'I'm a conservative. A ;le profit each day and I'm ppy. You can't go broke tking a profit." Vndy concedes it can get -veracking. He said one in at Merrill-Lynch didn't ly the market for two ars because he had one s and was terrified by the ?ught of another. He's ck now, said Andy, :ause the market is so dieting. Ever since he first bought ir>lf in hie M avu rlotic An/In > > aaau *1M T J UOJO s been watching the arket, but until the last two ;eks he's never had time to ly the options game. \lthough his degree is in lrnalism, about 40 percent his courses were in siness and finance, which idy said has helped him derstand the market a eat deal. "You try to sell just before e stock peaks. That way e guy who buys it from you imbles that it's going to go >more than you are willing bet. "If you sell it at the peak en you stand to lose veral points as it begins to > down before your sale >es through," Andy said. HIS STOCKBROKERS are Charleston and for a fee ey handle all his tranctions. As with most okers, an investor must low proof he can cover any irchases. Like most investors, Andy is an account with his okers that pays a good terest rate and which the okers use to buy and sell )tions as Andy directs. It takes $5,000 to >en an account, but it can i taken as low as :,000 . "An account is the easiest ay to handle it," Andy said, rhat way there is no ouble, everything is done i . Before deciding what :ock to buy an option on, ndy looks through ublications and magazines ) get an overall feeling for tie company and its rospects. Then he calls his roker. He has two choices: the roker can buy the option at larket prices or at a fixed rice. "I usually go with the ixed price," Andy said. Sometimes you can get tuck if the price suddenly umps on you on the market loor." After he calls his broker it ;ikes between lo and if) ninutes to buy the option. On he fifth day after the option urchase Andy's broker will ransfer the cost of the opion from Andy's account to Reseller. >w Jon "" . ' r= ZT 2^1 "it i' -4 ^,'r Andy makes a call to his brok a broker to sell can bring a stc Thpn <?nm? fh?? vvnit Anri PP the watch. Andy practically lives at Merrill-Lynch checking all the indicators; the Dow-Jones and NY Stock Exchange indexes and any thing else he can think of that will tell him the moment j the option price has almost j reached its peak. He checks the electronic ticker, the teletype with the business news and the Quotron, a visual display j j terminal on which can be I punched up everything you H would ever want to know N about any stock, and more. [ | Constantly updated, it is the h i investors' bible. It gives [ j overall stock position trends J J for foods, textiles, in- [ j dustrials, specifics on [ j buying, selling, asking, etc., j j etc. It will tell you | j everything except what | I socks to wear the next day. j Like tne otners patiently j uioti inrr anH iiidf/iViinfl ir? tho f YVU1V1110 UHU YTMtVlllllf, VIIV Merril-Lynch lobby, Andy is continually keying in his stock on the Quotron to see what the latest activity has been. Andy's calculator is never far away as he constantly figures the odds. The odds are an intricate part of the investors' business, and he must know them absolutely to survive. At lunchtime everything goes crazy, but Andy doesn't worry. "It's the brokers going to lunch, and the figures aren't really ac curate indicators until they _ return. I'm sure someone in { j New York does it on purpose [ j to drive investors across the M country berserk," Andy i.-j said. [ He likes it at Merrill- j Lynch. "It's interesting to hear the others talk It's a cooperative here We are all H small investors, and none of tc us can influence the market, g We're at it s mercy; we often is tell each other if we see their tl stock do something they may ir want to know. w "To be safe, utilities are g, thr? Vtrxct l\f>t Thnv rwu Utu\{\ dividends, and their stock gi certainly won't go clown in ai the long run. However, to d make real money you have tc es pa v-8 or. If made at the right tl )ckho/der a lot of money. How t< option Stocks are known as the p as the secondary, which m were to disappear tomorro\ a few stockholders may bl suicides on Wall Street. ] although a very profitable o The option buyer agrees for a certain price within nil Within five days the buyei the option. If at the end of option to someone else, th option - buy the stock at th lose his option money. There are two types of op Andy buys) and puts. With < the price for the stock is g what he agreed to buy it foi he sells his option to somei the stock will go up even fu the difference in the price and the price he sold it for. fins are me opposite, in betting that the price of the profit comes from selling thinks it will decrease mor< price of the option. People who buy option market and can make a g how it works: Assume that on May 1 th Motors is selling at $50 a sh August (the purchase or e? for $5 a share. Now assume stock has climbed to fc>6 a August presumably becom option is bid to $8 a share. I option for $500 it could nov $300 profit minus commissi Compared to buying sto looks like this: DATE COST OF < May 1 - bought $500 July 1-sold $800 gain $300 %return 60% > go with the smallerrowth companies, but that ; a risk As for options, ley're riot for the beginning _ \fAu 4 s\ vv.on/1 -- y \/u imvr IU MIUW hat you are doing. Its a amble all the way." When Andy's stock has otten as high as he wants -rid it must on the average limb at least 1/16 of a point > cover the broker's fee - he umll y1"" I 'me, one phone call telling o play I game j rimary market and options I! eans if the options market I j v a few brokers may weep, I j ink, but there would be no It is merely a sideline ~ j j ne. H to purchase so much stock 11 iafir rl o 1 ro iwvj uajo. r must pay the premium for 90 days he hasn't sold the e buyer may exercise the le agreed price -- or simply >tions: calls (which is what H :alls, Andy is gambling that oing up. If it goes up from r at the end of 90 days, then Dne who thinks the price of rther -- and Andy's profit is he said he would buy it for e buyer of the put option is [ | stock will decrease, and his I the option to someone who h j than the original purchase I is are speculators in the 1} reat deal of money. Here's ji e common stock of General I are and that GM options for 5 tercise date) can be bought \ ! i that by July 1 the common 11 i share. The GM option for les more attractive and the f you had bought a 100 share / be sold for $800, making a ons. ck itself, options vs. stocks OPTION 100 SHAKES $5,000 $5,600 has two choices. He can have the broker sell at a certain point or have the broker wait uuiii nnuv caiia in ciIhi su.ys the magic word -sell "1 usually call in since I know exactly when i want to let the option go. Again it take about 10 to 15 minutes for thp <nlp In 00 through v"v Dv ? ?O-- * Five days later, I collect the money. What a life!"