We all make mistakes even if our name is Warren Buffett or George Soros. But when great investors such as Buffett and Soros make mistakes, the lessons for the rest of us are so much more interesting!
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If you read the newspapers during any recession, one can really get the creeps. And as if there is a race between the media in "Who's The First To Time The End Of The World" they outplay each other with new disaster scenarios every day. A recession is suddenly the evil of everything; it's the end of the economy; it's the end of days!
Looking at the declining stock markets and the impending recessional effects on global economy, these end-of-the-world headlines fall on fertile ground. The ground of a very normal human emotion. FEAR! And because the media likes to pour more and more fuel into the fire, the fear of investors increases and stock prices drop even more.
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Especially when the stock markets have consolidated and broken down significantly, thousands of bargain hunters are on their way trying to find and buy dirt cheap stocks in the hope of cashing in large profits with these cheap trading stocks once the markets go up again!
And even beyond this scenario investors, a lot of times beginners, are in quest of buying cheap stocks whether they are penny stocks, undervalued stocks or any other alleged "great" cheap stock.
But when exactly is a stock cheap?
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I've posted an article on OTC Stocks on this website already, so just to recap:
Over-The-Counter (OTC) trading is trading financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. There are no stock exchanges like NYSE, NASDAQ, etc. involved. That's why this kind of trading is called over-the-counter because that's what basically happens.
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Over-the-counter (OTC) trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties.
There are no stock exchanges like NYSE, NASDAQ, etc. involved. That's why this kind of trading is called over-the-counter because that's what basically happens. The phrase "over-the-counter" can be used to refer to stocks that trade via a dealer network as opposed to exchange trading which occurs on futures exchanges or stock exchanges.
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There's a whole batch of underlying assets one can buy options for.
You can buy options on oil, interest rates, gold, all kinds of commodities and even airplanes. The list is endless! The term "option" refers to a type of derivative in which category it falls. An option is a derivative because it derives from something namely the underlying asset. In our case it's the stock which is why it's called a stock option!
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