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The Honest Penny makes his case for GBGM

pennylogicstaff — Sun, 04 May 2014 20:24:06 +0000

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or opinons of Penny Logic or any members of the Penny Logic Staff. No members of Penny Logic currently own shares of GBGM, though the author may. Always do your own due diligence.

I would like you guys to keep Global Gaming Network GBGM under heavy watch this week for a major bounce play. They describe themselves as “a developer of digital entertainment and sports information for online and mobile platforms”. They specifically have a strong presence and are a leading in “fantasy” sports online. The company has several revenue streams and activly releases press releases on many different exciting developments the company pursues please check out

http://www.globalgamingnetwork.net/latest-news/

and read their latest press releases.

GBGM Share Structure

Market Value¹	$883,663	a/o May 02, 2014
Shares Outstanding	736,386,012	a/o Dec 31, 2013
Float	251,500,469	a/o Dec 31, 2013
Authorized Shares	4,880,000,000	a/o Jan 09, 2014
Par Value	0.0001

This is a stock that earlier this year traded steadily well over a penny. It has recently had a parabolic dip. When real companies like this fall so low the question is not if they will bounce the question is when. As you can see on the chart GBGM seemed to create a bottom around the .002 area indeed many great penny stock players such as @Ilikebbstock and @radiosilentplay were calling the bottom. The stock bounce around the .0018-.0023 area but eventually that support fell. On Friday we finally saw strong bid support there was 11 million on the bid at .0011, and the end of day buying saw strong buying on the ask @ .0012 .

Selling has also dried up the last few days. The RSI indicates this stock is way oversold and the accumulation is on a uptrend. All this action leads me to strongly believe we have reached a bottom right above the psychological terror involved with this stock hitting the trips. It may take a few days to solidify the bottom, and we may test .0015 one or two times before breaking it but I feel strongly it will happen. Buying in the .0012-.0013 level involves a very low risk in my opinion as long as the huge bids on .0011 are there, offering liquidity and a easy way to get out if you get bored, impatient or if you see more selling and less buying then you like. So if you play this smart and buy down here the worst case scenario is you get out for a one or two tick loss. But the upside..well as you see a ten bagger from here is not unrealistic, especially if the company keeps on providing PR’s on a regular basis like they have been, if we get some momo and PR we can really take off. I think this play is very similar to REDG. This stock also was trading well over a penny in the beginning of the year, both stocks are in the entertainment sector and. REDG proceeded to go down very similar to GBGM:

It tried to hold the .0018 level it fell and once it hit .001 KABOOM it hit .013 two days later.So please watch closely for the reversal to start sometime this week.
Please follow me on twitter @pennycheck and check my blog for updates at thehonestpenny.blogspot.com

Yep, yet another disclaimer:

PLEASE NOTE WELL: Our employees are not registered as investment advisers in any jurisdiction whatsoever.

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Neither this company nor any of its members, officers, directors, contractors, or employees are licensed broker-dealers, account representatives, market makers, investment bankers, investment advisors, analyst or underwriters. Investing in securities, including the securities of those companies profiled or discussed in this notification is for individuals tolerant to high risks. Readers should always consult with a licensed securities professional before purchasing or selling any securities of companies profiled or discussed in our releases. It is possible that a viewer’s entire investment may be lost or impaired due to the speculative nature of the companies profiled. Remember, never invest in any security of a company profiled or discussed in a release or on our website or blog unless you can afford to lose your entire investment. Also, investing in micro-cap securities is highly speculative and carries an extremely high degree of risk.

To view our full disclaimer, visit: www.pennylogic.com.com/pldisclaimer.html.

Making Money by Trading Options: Part II – How to Read an Option Chain

pennylogicstaff — Sun, 03 Nov 2013 01:38:54 +0000

I our last post we wrote about how Cindy pulled off a deal of a lifetime in a manner very similar to buying a call option. If you haven’t read that post yet it may be helpful to do so since I will be using the same analogies throughout this discussion. Armed with a fundamental understanding on how buying and selling a call option works, the next step is to understand the language around the sale and the numbers. Sticking to our black dress analogy, we need to be able to read the price tags. In the case of options, the price tag is called an option chain. Every stock that has options associated with it has its own unique chain. A good place to find a stock’s option chain is on Yahoo’s Finance site. Put in the symbol of the stock you are interested in within the “Get Quotes” text box and the stock’s summary page will appear. If you can click on the “Options” link in the left-hand toolbar, then the stock in question has options associated with it.

The chart below is the option chain for Map Pharmaceuticals (MAPP) as of February 8, 2012. If you follow Rallytype’s public predictions it may sound familiar, since we have mentioned it. If you were to go to Yahoo Finance yourself you would note that I am only showing one of the two charts presented – the call options chart. For now, this is what we are interested in – the ability to buy a slip of paper which gives us the option to buy stock in the future just like in the dress analogy.

Options are available for different expiration dates. As you can guess the more out the expiration dates are the more potential they have to make money and the more expensive they are. In the example below we are looking at options that expire on June 13, which is about four months out from this date of writing.

Each option has a unique ticker symbol, just like the stock it is associated with. Although there are a lot of letters and numbers involved and the symbols may be quite confusing to look at, there is some rhyme and reason to all of it. Looking at the symbols closely you can make out information such as the stock symbol MAPP, the date the option expires and such. In this age of online trading, it’s all about clicking links anyway so don’t make yourself crazy on learning what every letter and number means.

The Strike Price is the price at which you the option holder (buyer) would be given the option to buy the underlying security before or on the expiration date. In the case of the dress analogy, this is how much we are willing to buy the dress for in the future. You will notice that some of the options are highlighted in yellow. These options are currently “in-the-money”. In the money options are those that today have intrinsic value. You could exercise the option today and buy the underlying security for less than what it is currently going for. Like we discussed in our last post, these options had their “Beyonce Event”.

The Last Price is the price at which that option last traded at. Note that options trade in blocks of 100 shares called contracts and options are priced per share. So to figure out how much the option would have cost you, you need to move the decimal point over two spots. A 22.50 strike price option in this example has a last price of 2.50 and cost the person who bought it paid $250. The Change Price is simply the change in price in the options between now and the market close yesterday. The Bid Price is how much you could get paid to sell the option if you owned it (remember to move the decimal points) and the Ask Price is the price that you would have to pay right now to buy the option. You would think that in all cases that the Bid Price and the Ask Price would be the same, right? Just like at the department store where the store puts a tag on a dress and a buyer plops down their credit card for that amount of money and takes it. Markets don’t actually work that way. There are folks behind the scenes who make trading possible and like all folks who make a living, they get paid. These people are called market makers and you can think of them as the middle men who buy the dress from the wholesaler and sell them retail.

The Volume is important metric to follow before you pull the trigger on buying a contract. The volume number of contracts traded during the trading day so far. You need to always keep in mind how many folks are interested in buying your option when you feel it is time to sell it. If you can’t find a buyer before the expiration date you are on the hook for either buying the stock when the option expires or walking away with nothing. The Open Interest tells you how many contracts are outstanding, meaning they haven’t been exercised yet. Most times when the Volume comes close to the Open Interest, a “Beyonce Event” occurred and the stock is moving upwards so the extent that the option is close to or in the money.

Let’s muddle up what you have learned so far with some math. Suppose it is March 2013 and you see a tweet from @Penny__Logic citing a new public prediction that MAPP may move 9% in the next 10 days. With MAPP currently trading at 24.89, an 9% bump would move it up to a little above 27. After doing your own extensive due diligence you think that this prediction may be right. Looking at the June 13 options chain you note that you can buy a call contract with a strike price of 25 for $5 (0.05 listed x 100 options per contract). Suppose in about two weeks’ time the stock does indeed go up to 27. How much is your option worth. A good “guesstimate” would be a little bit more than $200. The option is $200 in the money, meaning it is worth $200 in the then in now. There would be some additional premium you could get for it because the stock can still go up between now and June. Imagine if you bought 10 contracts for $50? You’d be sitting on $2000. Not too shabby.

Guesstimates are nice, but having more insight on your risk and reward before pulling the trigger on an option is even better. In our next post on the topic, I’ll talk about using an options calculator. They are online, they are free and will do you a whole lot of good.

Happy Trading!

-Russ

Making Money by Trading Options: It’s as Easy as Rocking a Little Black Dress

pennylogicstaff — Sun, 03 Nov 2013 01:31:27 +0000

We have gotten a lot of great feedback from our investment newsletters and websites, including Penny Logic. Our free and premium letters and services have been subscribed to by both novice and experienced traders and we couldn’t be happier with the engagement we have been having with our readers. One question that often comes up is that from very new traders who ask if you really need the recommended $3000 as used in our 3-For-5 Project and One-For-One Project model portfolios. Although you could follow these letters with less in your account, I think you would be disappointed with your returns. The average gain of each successful 3-For-5 Project newsletter recommendation is about 15%. With only $1000 in play you are only profiting $150 per trade and giving away about $40 in trade commissions. That along with the losses everybody takes once in a while will make you very slow out of the gate. Think of it this way – our 3-For-5 Project model portfolio started with $3,000. When you include trading costs you would have an 86% profit ($2,588 profit) in 18 months’ time. If you only started with $1,000 you would have a 40% profit ($402 profit) in 18 months’ time. Those trading fees really make a difference when you are a small trader. That’s why most investment services recommend not trading with less than $5000. We have a little different philosophy, but $1,000 is still a little slim.

One of the better ways you can leverage $1,000 is through trading options. Many readers tell me that they tried learning more about options but had trouble understanding the principle. I can empathize that no one would want to put their hard earned money into an investment they don’t fully understand. Truth be told though, trading the simplest of options (which is called “buying a call option”) is as easy as shopping for a little black dress.

Imagine a woman named Cindy who walks down a street and spots a little black dress in a boutique window. Not just any little black dress, but THE dress. Cindy has been looking for the perfect LBD since that Pico de Gallo incident at Chalupa Charlie’s and runs into the store praying for it to be her size. It is, but the dress is pricy – $1,000 bucks. She can’t buy the dress at the moment without breaking her budget but she does know that in about two months she will be getting her yearly bonus. She figures that buying the dress would be a great way to treat herself for a year’s worth of work well done, but she is almost certain the dress will get snagged off the rack before then.

Cindy talks to the boutique owner and learns that the dress is custom made and only 30 are in existence. This intrigues Cindy even more and she talks to the store owner about her dilemma. The owner takes a liking to her and makes her an offer. If Cindy is willing to give her $50, she will put the dress in the back and give Cindy a slip of paper that will allow Cindy to pick it up in two months for the price on the tag – $1,000. Cindy asks if the $50 she would hand over today be a deposit towards the dress. “No” replies the owner. “You see, I’m taking up space in my back room to hold a dress for two months that I can sell today. Besides, I’m committing to the $1,000 price. I am promising not to raise the price for two months and I don’t do that with any of my other dresses. Also, who knows if you are actually going to ever come back? The $50 is for my time and risk in the deal”. Cindy sees the owner’s point and plops down the $50, figuring that’s less than a night out at Chalupa Charlie’s and she doesn’t see herself going back anytime soon. The Pico de Gallo incident is a haunting one. As Cindy heads for the door, the owner chimes in “Remember, that slip of paper is good for up to two months from today. If you don’t come back before then the dress goes back on the rack and I never met you!” Cindy waves and leaves.

During the next five weeks, life happens. Her car needs a new water pump and her cat needs emergency surgery. Not only is her bank account sparse, but she’s already dipped into her credit cards and advanced herself her bonus money. Cindy realizes she has two choices in front of her. She can hope for a miracle and come up with the money for the dress in the next three weeks, or she can just forget about picking up the dress. The $50 she plopped down at the store a while back is gone regardless, but still she feels a bit foolish for getting involved with the shop owner before she had the money in her pocket.

The next weekend Cindy is watching the Super Bowl with her friends and she can’t believe what she sees on the television. Beyonce is on stage for the halftime show, rocking the same little black dress as the one in the store. Not THE same dress, since the boutique owner promised her that it would stay in the back for at least three more weeks, but it is the same exact design. Some phone calls the next day and a few fashion magazines confirm this. It so happens that the boutique owner sewed the same dress for Beyonce. A check online shows that the dress she saw in the window a few weeks back for $1,000 is now worth $15,000. “Wow!” says Cindy. “This is a no brainer! Now I have to pick up that dress. It’s worth $15,000! I just have to come up with the $1000 for the dress and sell it!”

Actually, this isn’t Cindy’s only choice and if Cindy has already decided to sell the dress it may not even be the best one. This is where many new traders get lost when they try to learn about trading options. Cindy doesn’t have to sell the dress to make money. She can also sell her slip of paper. Selling the piece of paper has less risk associated with it, doesn’t it? Suppose she got together the $1000 to buy the dress and before she gets a chance to sell it Howard Stern decides to sport the same dress on America’s Got Talent. The price of the dress plummets to nothing and Cindy is out $1000. Instead if she sells the paper, which she already owns in full, she lays out nothing more than what she already did – the $50. Cindy decides to do this and sells the slip of paper to a friend for $11,000. Cindy makes $10,950 on the deal and her friend got a $15,000 dress at a $3,000 discount (remember, her friend has to actually buy the dress for $1,000 in addition to buying the slip for $11,000). Everyone is happy, except of course the shop owner who allowed her good heart to cost her $14,000 in potential profit.

If you understood Cindy’s story then you now understand the fundamentals of buying a call option. With a call option (in the dress example, the slip of paper), you pay a premium (in the dress example, the $50) to be given the right to buy 100 shares of stock (the little black dress) at an agreed-to price, called the strike price (in our example, the price of the dress – $1000) before the option’s expiration date (in our example, the two months). Just like Cindy’s case, you can either trade in option and pay the strike price and get the 100 shares of stock or you can sell option itself to another trader before it expires.

In order to hit a gold mine like Cindy, you need a “Beyonce Event” to occur which will raise the price of the option’s underlying stock before its expiration date. To do well trading options you need to find a source of stock predictions which not only speak to how much a stock is expected to appreciate in price, but also in what amount of time.

In the next set of posts we will be talking about how to read an options chart and how to use an options calculator. For now, take a look at our public predictions page and read a little more about how you go about buying and selling back call options. If you have any questions, you know where to find us.

Happy Trading,

–Russ

Why Your Favorite Penny Stock Newsletter is Failing You

pennylogicstaff — Sun, 03 Nov 2013 01:20:07 +0000

If you are new to investing in the stock market you may have read a blog article or two telling you that newsletters are a waste of time – noting that it is extremely rare that one actually sees the same investment return as their newsletter’s model portfolio. Although that may be true, what these naysayers will not tell you that the problem isn’t with the newsletter, the problem is with the investor. How can that be when all you have to do is follow the newsletter’s instructions by the letter? The problem is that most folks don’t. Just like with a well-regarded diet, it doesn’t take a lot of cheating for you to miss the mark.

So how do folks “cheat” on their newsletters? Here are the most common culprits:

Emotional Investment in a Position: Newsletter authors no that when a position is not working out it’s best to cut losses early and move on to the next position. That’s a hard pill to swallow for some investors who seem to feel that maybe sticking around just a few more days will get them back to par. Bad idea. Newsletters look to re-coup losses quickly too. They just do it through a better position.

Selectively Picking Positions: There is no newsletter that ever makes money on all of its positions. If you ever find one on the web that says so you should close your browser as quick as you would if your boss caught you on Facebook. A newsletter is on track when the good positions are more numerous than the bad and make more money than the bad ones lose. The problem is that there is rarely any rhyme and reason to if the next position is going to be a winner or a loser.

Suppose you were at a casino and you saw that the nearby roulette table hit five reds in a row. If you were going to bet on the next spin would you bet on red, figuring that a streak like that has to continue, or would you bet black because the odds of the table hitting six reds in a row is extremely slim to none? The correct answer is that both of those strategies are ridiculous, since every spin of the wheel is a completely independent event where the previous spins have no bearing on the earlier ones. With all of the volatility associated with the equity markets you really should treat every newsletter position the same way. Waiting out a newsletter’s “bad streak” is as silly a waiting for red to show up on a roulette wheel. Bad idea.

Following Multiple Newsletters with the Same Capital: Talk about cheating! Using the same capital to follow two newsletters never works out. Whether you close out one position too early to chase another or miss out on a big win because all your capital was already tied up, they speak to the same adage – “When you try to do both, you are doing neither”. I can almost guarantee that if you try to share capital amongst several newsletters your overall investment performance will be worse than the poorest performing newsletter. I chalk that statement up to my own experience.

Newsletters are a great investment tool. But just like dieting, getting the performance you want and expect requires emotional discipline. Before you start hating on the newsletter game, remember that maybe you need to “not hate the game, but hate the player”.

Happy Trading!

-Russ

A ’6900% Gain in Just Two Weeks!!!’ and Other Penny Stock Newsletter Tall Tales

pennylogicstaff — Sat, 02 Nov 2013 01:41:58 +0000

In addition to contributing to Penny Logic, I am the managing director of Exceptional Outcomes (EO), which is a consulting company that works with folks who write stock newsletters. Through EO, we help them with their marketing and we help them with their credibility. Although stock newsletters pay for our lunch each day, we believe that investors need to be aware of the tall tales that some newsletters speak to – such as thousand percent gains over a period of days. Such tall tales don’t help investors use newsletters to their best advantage and they are definitely not good for the overall credibility of the industry. With that said, the next time you read that a newsletter provided its subscribers 6900% gains in two weeks, here are some things to look out for.

The ‘Classic’ Sell at the Peak: This one could go without saying, but It always seems that newsletters know exactly when to sell a winner, right? They never seem to sell to soon or hold on a bit too long. At the time of writing this post, our own 3-for-5 Project model portfolio has provided a return of about 125% over an 18 month period. Since we use a model portfolio for transparency, we hypothetically speak to how we would manage cash flow in a portfolio and when we would get in and out of every trade. I calculated that if we somehow miraculously got out of every long trade at the very top, the same model portfolio’s return would be 876%. Pretty impressive, right? To this day I can’t time a stock’s exit perfectly and neither can most newsletters. “Up to a 200% gain” has a nice ring to it though. Most newsletters don’t provide a model portfolio, and that is OK. With that said, it does allow for certain “monopoly money” liberties you should watch out for.

Imaginary Compounding: I had a potential client ask me to take a look at his company’s landing page to see if we could help increase their conversion rate. One thing his page spoke to was how he alerted his subscribers to over 8000% in gains in a two week period. I did the math and it really came out to a little over 30% if all the advice was traded on (which to be fair, isn’t a bad return for two weeks’ time). What caused the discrepancy? I won’t go into the exact details out of respect for the person, but it had to do with the issues of allocation and compounding. Almost all the promotions were going on simultaneously – as if magically the subscriber could put all their capital into each promotion one at a time and get in at the each low and out of each high. If a subscriber is presumably allocating their capital across four or five promotions, you can’t get away with compounding the absolute best gain of each promotion. Sounds like a third grade math error, but you would be surprised how many newsletters try to pass that nonsense along.

Invisible Volume: On the evening of February 8^th of 2013, scores of penny alert subscribers received emails on how they missed an “opportunity of a lifetime”. Tamir Biotechnology (ACEL) rocketed in price that day, opening at 0.001 and hitting a high of 0.07 – that’s a 7000% gain. Think about that! How would your life be different if you invested your life savings and made a 7000% gain in one day? Well, what most newsletters didn’t speak to was the fact that only 4500 shares were traded – that’s about $5 worth. Could you have in fact round-turned $1,000 worth of stock on that “million dollar day”? Probably not. One lucky trader did turn that $5 into $343 though.

Forgetting to Mention the Split: I personally bought a few thousand shares of FreeSeas Inc. (FREE) on February 12th, 2013. Just two days later the price increased by 1000%. Not too shabby, huh? Well the thing I didn’t add was that the 1000% price appreciation was due to a ten to one reverse stock split. I didn’t make a dime, but I didn’t lie – the price did go up by 1000%, right? I don’t see this kind of cooking going on too much with newsletters, but it does on occasion happen. In some cases you can blame it on a bozo who isn’t watching the farm well enough. In either case, be sure to hit the unsubscribe link on that one, because you are reading pure trash.

Penny newsletters can provide their readers some great insights. If we didn’t think so, we wouldn’t be in the business. But there are some newsletters that don’t appreciate the fact that shenanigans like the ones listed above end up increasing their overall cost per subscriber and degrading their newsletter’s life cycle. Both of those things cut into their profitability. The next time you are hunting the web for a newsletter I hope you keep these thoughts in mind. Checking our own real-time newsletter would be appreciated too!

Happy Trading,

Russ

Why You May Be a Sucker for Paying for Your Penny Stock Newsletter

pennylogicstaff — Sun, 07 Jul 2013 18:57:16 +0000

Do a Google search on “penny stock newsletter” and you will be presented a good amount of free newsletters that are ultimately supported by paid promotions. You will also see a nice number of listings for newsletter sites that punch their meal ticket using subscription fees paid by folks like you. These “premium” sites claim that they are worth every penny of their price and then some. Some talk about the picks they make for their readers that result in monster gains. Others talk about their incredible consistency pick after pick that surpasses any of that “free crap”. There are also a few who are presumptuous enough to tell you why you are too stupid to read a free newsletter without getting burned.

Many of these premium sites do a good job of chalking up gains for their readers, don’t get me wrong. What you should be on the lookout for are sites that do nothing more than take your money each month and regurgitate the same info you can find on the web or in other newsletters for free.

Not to pick on one particular premium newsletter, but take a look at the history of picks of this premium penny stock newsletter. It’s interesting enough that they only list the picks that were made later than a year ago, I will get to that in a minute. What you should note is that of the last ten picks listed in this history, eight of them were actively promoted during or very close to the time they passed them to their paying readers and were identified at the same time by several fee, unbiased resources . You can verify this yourself, for free I might add, using many of resources on the web that keep folks up to date on promotions and their performance free of charge. I checked stockpromoters.com in writing this post, which happens to be one of the most comprehensive sources of information on the web for promotion information. The Pump and Dump’s Nightly and PennyStocks24 are also great, informative resources that come to mind.

You could argue that the true purpose of a premium newsletter is to cut through the garbage and give you an expert unbiased opinion on which promotions are going to make their readers money. Unfortunately for many sites like the one in this example, the jury is out. Did you notice the fine print in the pick history that says “the high prices listed are the highest price the stock traded at, no more than one year after the stock was profiled”? This is all too common with premium sites. One year? Keep in mind that many promoted stocks, including the ones listed in their history, are promoted multiple times. Nice that these folks get more than one shot in their revolver, huh? Also anyone insinuating that a position in a promoted stock should be held for a year is not only naive but also irresponsible.

Are there premium newsletters out there that are worth your money? Absolutely. Just be sure that you aren’t buying “bottled tap water” before you hand over your credit card. Also, keep in mind that there are great free penny stock resources on the internet that are worth your time. Our free web site highlights penny plays that we think may interest you and follows them on our real time dashboard until the next market close. And no, we don’t expect folks to hold their positions for a year. Check us out.

Happy Trading,
-Russ