the logic of buying "costly" stocks

when u r sinking....where do u put ur dry cookies? 

in the container which has already sunk or in the one that is still dry? 

.....so, by this logic i keep buying/adding those stocks on every nifty decline which are not falling or have fallen much less....

earlier i used to buy the stock which was available much cheaper than earlier....the one which has fallen the most....instead of those which were still relatively dearer.....

Don't overpay!

One of the best nifty options to buy is

the option which is 200 points (3-4%) "out-of-money"

in the direction suggested by the rsi!

But what should you pay for it?

From my experience, I feel that 15 is a good price to buy!

If it is much more, it is costly.

If it is cheaper, it is a steal!

e.g. the spot (underlying) nifty price after today's close is 5988.

RSI is suggesting imminent upmove.

6200 CE (around 200 out-of-money) is available at 12.

This is a mouth-watering bargain.

Any trader buying this is likely to double, tripple or quadruple (even more) his investment in a few sessions.

Only two cautions:

1. the option you buy should be favourable to rsi's stance.

2. expiry should be atleast 5 days away.

Bidding for Diana!

Mulla Nasruddin went to a mela.

He saw a crowd in a corner.

"50000 Dinars!"

"55000"

"65000 dinars!"

"66000!!!"

He was perplexed to hear the loud voices.

It didn't take his inquisitive mind long to figure out that traders were participating in an auction.

"70000 dinars!"

"72000"

"75000 dinars!"

"What is the auction for?" Mulla asked!

"I don't know exactly" replies an onlooker.

Mulla went to the person who was one of the traders putting the bids.

"What is the thing being auctioned?"

"Probably it has got something to do with a horse!" the trader replied.

"You are bidding and you don't even know that?" Mulla ridiculed the trader!

"Why should I bother? I came here to make money. I saw people bidding so competitively. I am sure it must be something precious they all are after!" the trader justified.

Another trader standing nearby heard the two's conversation and said

"I just came here. Somebody told me that the auction was related to the famous racing horse Diana! When I saw so many merchants so feverishly putting the bids I was sure that Diana must be precious!" replied the trader.

"Where is the Diana?" Mulla asked further.

"Don't know? Haven't seen!" the trader replied, visibly upset at the disturbing Mulla.

Mulla too wanted to bid for Diana.

He had a small bag full of gold coins he had won as prize from the sheikh in the previous town.

But he wanted to have a look at the Diana first.

He asked other traders but nobody had even a clue about Diana!

Then finally one trader said "Diana is probably hidden in that tent!"

Mulla saw a guarded tent at a distance.

He stealthily went to the rear of the tent and peeped inside.

He saw a goat inside!

A guard caught Mulla peeping inside.

"What are you doing here?" the guard asked.

"I am looking for Diana!" Mulla asked.

"Diana is not here!" the guard shot back.

"But the trader there said the auction was related to Diana-the racing horse!"

"Yeah! It is!" the guard nodded.

"But this is a goat!"

"This famous goat's milk is supplied by my master Sheikh Abdul for the consumption of Diana! My master hired the royal agents to auction the goat!"

Apples of Himachal !

Himachal is famous for Apples!

Wherever you are, whenever you eat an apple, there is a good chance that it has come from the high altitude orchards of Himachal (whether from Shimla, Kinnaur or Kullu distt.).

Each box of apple contains 90 to 175 crisp, juicy and nutricious apples (depending upon the size of apples)!

Last year Himachal produced 1.5 Crore boxes of apples.

And it was considered a bad yield!

You must be thinking that the orchardist must have regretted the poor output!

On the contrary, they laughed all the way to the bank. Tax free!

Since the supply was drastically reduced from the previous year, a box of apple which normally fetches Rs.800-1000 fetched upto Rs.2500!

Supply and demand at work!

This year the crop is bumper!

Estimated 4.5 crore boxes!!!

Should the orchardists be partying?!!!

Think again.

The bumper crop has resulted in the fall in the prices!

The price has dropped to 800 per box!

You think the quality of the apple in the 800/- box was poor!

You are grossly mistaken.

As per my first hand information from a young orchardist Ravi, it was painful for him and his family to get 800 per box for 'A' grade mouthwatering export-quality apples whereas last year even 'B' grade apples fetched 1700 per box!

Fundamental quality of apple crushed by the supply and demand market forces!

Hail fundamentals!!!

liars on the dalal street

"30% festival off!"

"upto 50% off!!!"

"50+30% discount"

"Buy 1, Get 1 free"

"Buy 2, Get 3 free"

"upto 90% off!"

These are some of the funniest and most amusing lines I see in the markets!

Everyone asks for discount before buying!

Every shop worth his trade ensures that he gives discount after some tantrums!

Before even that he ensures that he has changed 400 price label with 500!!

Abraham Lincoln was probably wrong when he said - "You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time...."

Discount culture has been fooling all of the people all of the time!

Or, put it differently, all of the people have being deliberately yearning to be befooled all of the time.

In still other words, all of the people have been befooling themselves all of the time!

It is a mirage we all know but we all love to ignore!

Afterall, what does a 30% or 50% or 80% discount mean?

Why should anyone expect a discount and why should one give a discount?

Why not price it fairly?

A discount can mean one of the five things:-

1) Either you were being overcharged earlier, or

2) There is a problem with the product or service being sold now, or

3) They have jacked up the price before window dressing it with "discount" or

4) They are selling it now at a loss, or

5) It is a distress sale.

Distress sale doesn't happen everyday, everywhere and with every product or service!

Also, obviously, nobody sells at loss unless it is a distress sale!

So, the truth lies somewhere in the first 3 lines.

=======

The same logic applies to stock prices

1) Either it was earlier overpriced, or

2) There is some fundamental problem with the company or sector or economy, or

3) The "insider" brokers along with the "friendly" media create an impression of a "discount" after a jacked-up price!

=======

An aware trader or investor should be sharp to spot the reason and call the bluff!

Majority of the trades in the market are bluffs

Learn to know the real worth of a stock, catch every liar on the dalal street!

The price u pay!

We buy stocks of companies which sell products and services.

As the price goes up, the stock price generally goes up in anticipation of increase in profitability.

Ever wondered how these companies decide the price of their product and services?

Generally we think it is just the cost price plus the profit margin.

However, it is rarely that simple. Given below the influencing factors:-

* Price is what the customers can or will be willing to pay!!!
- Every company will ask for the highest price customers will pay!

* Competition and Availability
- Lack of competition gives the company liberty to jack up the price!

* Image, Quality-perception, Branding
- Higher the quality and brand perception, higher will be the perceived price and hence the price-lable!

* Size of the market at that price
- More the price beyond a level, lesser the sales. Every company decides on how much it can
produce and how much it should produce. After deciding this number, the company decides on the highest price that will still ensure that much of sales!

* Sales Price = Cost Price + Profit
- This traditional and theoretical formula is rarely followed as it is.

* Strategy, Tactics
- Sometimes a product or service is priced strangely. It surprises you. Like Kabir Mulchandani shocked everyone by offering colour television below Rs.10000/- or Reliance offered cell phones in Rs.500/-!! But that is a strategy! A tactic!!

* Milking
- Generally every product or service is priced in a way to milk the market the most. In the beginning of the life cycle of any product, the customer is willing to pay the highest.
Gradually, the price is reduced to expand the circle of buyers more and more. The reduction (with bouts of rejouvenation and refreshing of the product) in price reaches to astonishing level to milk the most.

* Psycho pricing
- Many a times price of the product is decided to influence the psychological reaction of the customer. That explains why Bata priced its product as 299.95 or many others prefer 29 to 30 or 99 to 100!

* Cost v/s Price
- The real cost of a product can be much different (read higher) than the initial price. A Rs.500/- airline ticket costs you more than double after taxes and many additional charges!