Just a few short months ago a college senior made that walk and proudly received her diploma.
Like most, she had friends and family in the audience that shared in the glow.
After that day, for all I know, she may have joined other graduates around the country and is now occupying something to protest her educational debts and lack of employment.
Although lots of people making that walk have their own truly unique stories, this graduate made her news even before birth and gave rise to an investing strategy for me, years later.
And so it was more than 20 years ago that we were debating the ethics of her actual birth and plans for her life.
No she wasn't going to be sacrificed at some Aztec altar to appease the Gods and no, her birth wasn't part of an elaborate plan to pay back some childless drug baron in South America, in order to spare the lives of a village that didn't meet its cocaine harvest quotas.
As an aside, my advice to those farmers? Diversify.
Her birth was engineered, following a reverse vasectomy procedure, in the hopes that her bone marrow would be a match for a then 16 year old child with a rare form of leukemia. All other hopes had been exhausted and the clock was ticking.
The probabilities were small. 40+ year old parent wannabes already puts you at a disadvantage. There's nothing like carefree teenaged sex to ensure a pregnancy. Once you get to 40 and have the stress of desperately wanting to procreate, you're already behind the eight ball.
Sure, most of the time the reverse plumbing procedure works, but add that into the mix along with the fact that you're hoping for a perfect match.
And then there's the march of time, as well.
Nine months to create a child, then another year to be medically cleared for being a marrow donor is a long time, especially when cancer is involved.
It was a long shot and raised lots of heated opinions when the story broke before her birth. The story itself, despite all of the controversy, recruited more than 100,000 people to add their names to the bone marrow donor registry.
Just 10 years earlier, I had been a resident at Boston Children's Hospital, back in the early days of bone marrow transplantation. There was no certainty of a good outcome at that time. In fact, the certainty was in the other direction. On top of the horrific chemotherapy came months of isolation in the "laminar air flow" room, before and after the procedure.
Long story short, the match was perfect and the older sister was there to watch her baby sister receive that diploma.
Alright, that's enough of a preamble. What does that have to do with stocks and investing?
I will be replacing a big portion of my portfolio this week, as many of my positions were assigned due to the sale of call options. An unwanted rally this past Friday saw to that outcome.
A few years ago, when everyone saw their portfolio values plummet, I decided to adopt the "have a child to save a child" investment strategy. Other than David Einhorn and John Paulson, who didn't get vanquished? Back in those days we didn't really talk about the 99% to 1% schism. But on paper, at least, the 1% probably got hit disproportionately, although they still would have stayed in that 1%.
I've used that strategy again the past couple of months following our mini-bear market.
Face it, your choices are limited when faced with vast declines in your stock prices. It's not like reversing a vasectomy.
You could hope for an incredible climb back; you could dump your losers and try to pick "winners"; you could cash out or, if you have available cash you could add new positions or average down.
With an investing strategy based on collecting options premiums, it's difficult to stomach taking those premiums for strike prices that are well below your cost basis. There's a limit to how many strategic tax losses you really need. Worst of all, you would hate seeing those beaten down shares get exercised at beaten down strikes just as the market seems to be reversing course and heading back upward.
My choice was to average down. Almost bomb shelter mentality, except that no squirrels were skinned in the rebalancing of any portfolios.
Those sister shares, the new ones added to existing positions were the basis for the climb back.
I still have fond memories of a long ago held stock, LSI. Just another one of those companies that I really have no idea of what it is that they do or provide.
I initially bought those shares for my kids' account and it became one of the first stocks on which I sold calls. With an initial purchase price of about $10, it just went down from there. I kept buying more shares and selling calls on those new shares. I would then use the premiums to buy even more shares.
Occasionally, in fact, more often than not, the new shares would be lost to assignment, with ensuing capital gains on both the shares and the options premium.
Then it would be time to buy even more shares to replace the ones lost.
Over and over again. And over. Until that day came that premiums offset the loss in shares, and the shares were eventually assigned.
I never went back to that specific well, but the concept stuck and after a couple of years of dormancy, the time returned for its application.
Instead of considering my lots on the basis of their average share cost, I considered them on the cost per lot.
Instead of selling call options on the entire holding, I chose to sell call options, typically for in the money or near the money options on the new shares only. Those premiums were the basis for restoring life to the older shares.
Where I differed from the parents from that ground breaking story 20 years ago is that I don't really care about the well being of my baby shares. They're around for that single purpose.
I had the advantage of knowing that they were a perfect match. One share of Riverbed Technology is precisely the same as the next share.
I have no doubt that if that baby born 21 years ago had not been a perfect match, or if the bone marrow transplantation had failed, the parents would still have given unconditional love to their newborn child.
I wish I was that kind of person.
For me, it is all about the Aztec sacrifice or paying off the debt borne out of a bad harvest.or stock selection.
On Monday or Tuesday, depending on how the market opens, I'll need to add lots of new children. I'll have high hopes for all of them, but am consigned to the fact that some of them, perhaps most, will be held hostage by the external factors that rock the markets.
Instead of giving up on those "losers", there will be plenty of opportunity to dip into the equivalent of a modern medical miracle of bone marrow transplantation.
Stock options give new life and hope to live yet another day.
Just as a child is the derivative of a parent and the organs, stem cells and marrow are a derivative of that child, there shouldn't be any ethical qualm or concern about using "instruments" that are so far removed from their origin to help sustain life or financial health.
L'Chaim.
Option to Profit is available as either an eBook or 300+ page paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.
More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.
Find OTP Book at Amazon, B&N or now you can also Order direct from publisher. See a sneak preview of Chapter 1. hoco blogs
Want to instantly download PDF file with full color charts and tables? 
Invest like TheAcsMan
Option to Profit is available as either an eBook or 300+ paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.
See a sneak preview of Chapter 1. hoco blogs
More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.
Find OTP Book at Amazon, B&N or now you can also Order direct from publisher. Use 10% Discount Code P4S2ZD8H
No comments:
Post a Comment