sonny-dev/inters-qdu huggingface dataset:
Query: When to sell a stock?

Relevant passages:
 <=SEP=> I am a believer in stocks for the long term, I sat on the S&P right though the last crash, and am 15% below the high before the crash.  For individual stocks, you need to look more closely, and often ask yourself about its valuation. The trick is to buy right and not be afraid to sell when the stock appears to be too high for the underlying fundamentals. Before the dotcom bubble I bought Motorola at $40. Sold some at $80, $100, and out at $120. Coworkers who bought in were laughing as it went to $160. But soon after, the high tech bubble burst, and my sales at $100 looked good in hindsight. The stock you are looking at - would you buy more at today's price? If not, it may be time to sell at least some of that position.

 <=SEP=> "My theory is that for every stock you buy, you should have an exit strategy and follow it.  It is too hard to let emotions rule if you let your default strategy be ""let's see what happens."" and emotional investing will almost never serve you well.  So before buying a stock, set a maximum loss and maximum gain that you will watch for on the stock, and when it hits that number sell.  At the very least, when it hits one of your numbers, consciously make a decision that you are effectively buying it again at the current price if you decide to stay in. When you do this, set a new high and low price and repeat the above strategy."

 <=SEP=> Keep a diary, before buying write down why are you buying the stock, how long do you plan to keep it. Put down reasons when you would sell it. For example you buy a stock because it has lot of cash reserve, it is a focused company, good management. You would sell when management leaves or it starts to use its cash for  acquisition that are not fitting in profile.
Query: Is it possible to transfer stock I already own into my Roth IRA without having to sell the stock?

Relevant passages:
 <=SEP=> "No. A deposit to an IRA must be in cash. A conversion from traditional IRA to Roth can be ""in kind"" i.e. As a stock transfer. Last, any withdrawals can also be in stock or funds.  IRS Publication 590, so important, it's now in 2 sections Part A and Part B, addresses IRA issues such as this as well as most others.  By the way - now on page 7 - ""Contributions, except for rollover contributions, must be in cash."""
Query: Buy on dip when earnings fail?

Relevant passages:
 <=SEP=> What is cheap? A stock may fall from $20 per share to $10 per share, but it may have gone from making a $100M profit last year to a $100M loss this year. So now at $10 per share it may still be considered expensive. You need to be very careful when to consider that a stock is cheap or not, you'll have to look at more than just the share price.
Query: What do these options trading terms mean?

Relevant passages:
 <=SEP=> "Can anyone explain what each of them mean and how they're different from each other? When you ""buy to open"", you are purchasing an option and opening a new position. When you ""sell to open"", you are creating a brand new options contract and selling it. ""Covered"" means that you have assets in your account to satisfy the terms of the options contract. A ""covered call"" is a call option for which you own shares of the underlying stock that you will sell to the buyer at the option's strike price if he exercises the option. If you previously made a ""sell to open"" trade to create a new position, and you want to close the position, you can buy back the option. If you previously made a ""buy to open"" trade, you can ""sell to close"" which will sell back your option and close your position. In summary:"

 <=SEP=> "With stocks, you can buy or sell. If you sell first, that's called 'shorting.' As in ""I think linkedin is too high, I'm going to short it."" With options, the terminology is different, the normal process is to buy to open/sell to close, but if you were shorting the option itself, you would first sell to open, i.e you are selling a position to start it, effectively selling it short. Eventually, you may close it out, by buying to close.  Options trading is not for the amateur. If you plan to trade, study first and be very cautious."

 <=SEP=> "The two dimensions are to open the trade (creating a position) and to buy or sell (becoming long or short the option). If you already own an option, you bought it to open and then you would sell it to close. If you don't own an option, you can either buy it to open, or sell it (short it) to open. If you are already short an option, you can buy it back to close. If you sell to open covered, the point is you're creating a ""covered call"" which means you own the stock, and then sell a call. Since you own the stock, the covered call has a lot of the risk of loss removed, though it also subtracts much of the reward possible from your stock."
Query: What is an “Options Account”?

Relevant passages:
 <=SEP=> Options are a derivative product, and in this case, derive their value from an underlying security, a traded stock. An option gives you the right, but not the obligation, to buy a stock at a given price (the strike price) by a given time (the expiration date.) What I just described is a call option. The opposite instrument is a put, giving you the right, but not the obligation, to sell the stock at a given price.  Volumes have been written on the subject, but I'd suggest that for a custodial Roth, I'd not activate the ability to trade options.  How to get started with options investing? offers a nice introduction to trading options. In my response, I offer an example of a trade that's actually less risky due to the option component.
Query: Can the risk of investing in an asset be different for different investors?

Relevant passages:
 <=SEP=> The other example I'd offer is the case for diversification. If one buys 10 well chosen stocks, i.e. stocks spread across different industries so their correlation to one another is low, they will have lower risk than each of the 10 folk who own one of those stocks per person. Same stocks, but lower risk when combined.

 <=SEP=> The risk of the particular share moving up or down is same for both.   however in terms of mitigating the risk, Investor A is conservative on upside, ie will exit if he gets 10%, while is ready to take unlimited downside ... his belief is that things will not go worse .. While Investor B is wants to make at least 10% less than peak value and in general is less risk averse as he will sell his position the moment the price hits 10% less than max [peak value] So it more like how do you mitigate a risk, as to which one is wise depends on your belief and the loss appetite

 <=SEP=> In a perfect market, share prices are by definition a perfect reflection of the true value of a share. Hence, you always get $10 for a share that's worth that much. In reality, the market is imperfect. Prices are somewhat of an average of all different estimates, and there's a cost-of-trading margin between sales and buy prices. Hence, in a perfect market it doesn't matter whether you have a stop loss order at $9.00. That just trades your stock worth $9 for cash worth the same $9. In an imperfect market, that trade nets you less. Furthermore, is risk a linear function of money? Perhaps not, if you bought on margin, need to lend extra and your interest rate increases with the extra credit demand.

 <=SEP=> Capping the upside while playing with unlimited downside is a less disciplined investment strategy vis-a-vis a stop-loss driven strategy. Whether it is less risky or high risky also depends on the fluctuations of the stock and not just long-term movements. For example, your stop losses might get triggered because of a momentary sharp decline in stock price due to a large volume transaction (esp more so in small-cap stocks). Although, the stock price might recover from the sudden price drop pretty soon causing a seemingly preventable loss. That being said, playing with stop losses is always considered a safer strategy. It may not increase your profits but can certainly cap your losses.
Query: Strategies to recover from a bad short-term call options purchase where the underlying dropped instead?

Relevant passages:
 <=SEP=> "For personal investing, and speculative/ highly risky securities (""wasting assets"", which is exactly what options are), it is better to think in terms of sunk costs. Don't chase this trade, trying to make your money back. You should minimize your loss. Unwind the position now, while there is still some remaining value in those call options, and take a short-term loss. Or, you could try this.  Let's say you own an exchange traded call option on a listed stock (very general case). I don't know how much time remains before the option's expiration date. Be that as it may, I could suggest this to effect a ""recovery"".  You'll be long the call and short the stock. This is called a delta hedge, as you would be delta trading the stock. Delta refers to short-term price volatility.  In other words, you'll short a single large block of the stock, then buy shares, in small increments, whenever the market drops slightly, on an intra-day basis. When the market price of the stock rises incrementally, you'll sell a few shares. Back and forth, in response to short-term market price moves, while maintaining a static ""hedge ratio"". As your original call option gets closer to maturity, roll it over into the next available contract, either one-month, or preferably three-month, time to expiration. If you don't want to, or can't, borrow the underlying stock to short, you could do a synthetic short. A synthetic short is a combination of a long put and a short call, whose pay-off replicates the short stock payoff.  I personally would never purchase an unhedged option or warrant. But since that is what you own right now, you have two choices: Get out, or dig in deeper, with the realization that you are doing a lot of work just to trade your way back to a net zero P&L.  *While you can make a profit using this sort of strategy, I'm not certain if that is within the scope of the money.stachexchange.com website."

 <=SEP=> The nature of options requires you to understand that they are essentially a bet. In one sense, so is investing in stocks. We imagine a bell curve (first mistake) with a median return at 10%/yr and a standard deviation of about 14%. Then we say that odds are that over some period of time a monte-carlo simulation can give us the picture of the likely returns.  Now, when you buy short term options, say one month or so, you are hoping the outcome is a rise in price that will yield some pretty high return, right?  There was a time I noticed a particular stock would move a large percent based on earnings. And earnings were a day before options expiration. So I'd buy the call that was just out of the money and if the surprise was up, I'd make 3-4X my money. But I was always prepared to lose it all and often did. I never called this investing.  I know of no recovery strategy. Sorry.
Query: Tax implications of exercising ISOs and using proceeds to exercise more ISOs

Relevant passages:
 <=SEP=> That is a weird one.  Typically one never needs to layout cash to exercise an option.  One would only choose to use option 1, if one is seeking to buy the options.  This would occur if an employee was leaving a company, would no longer be eligible for the ISO (and thereby forfeit any option grant), and does not want to exercise the options.   However, what is not weird is the way income tax works, you are taxed on your income in the US.   I assume you are talking about the US here. So if you exercise 10K shares, if under either option, you will be taxed on the profit from those share.   Profit = (actual price - strike price) * shares - fees

 <=SEP=> This may be a good or a bad deal, depending on the fair market value (FMV) of the stock at the time of exercise. Let's assume the FMV is $6, which is the break even point. In general this would probably be treated as two transactions. So overall you would be cash neutral, but your regular tax income would be increased by $30,000 and your AMT income by $60,000.

 <=SEP=> I've never heard of an employer offering this kind of arrangement before, so my  answer assumes there is no special tax treatment that I'm not aware of. Utilizing the clause is probably equivalent to exercising some of your options, selling the shares back to your employer at FMV, and then exercising more options with the proceeds. In this case if you exercise 7500 shares and sell them back at FMV, your proceeds would be 7500 x $5 = $37,500, with which you could exercise the remaining 12,500 options. The tax implications would be (1) short-term capital gains of 7500 x ($5 - $3) = $15,000 and (2) AMT income of 12,500 x ($5 - $3) = $25,000, assuming you don't sell the shares within the calendar year.
Query: Is it best to exercise options shares when they vest, or wait

Relevant passages:
 <=SEP=> The general rule with stock options is that it's best to wait until expiration to exercise them.  The rationale depends on a few factors and there are exceptions. Reasons to wait: There would be cases to exercise early: Tax implications should be checked with a professional advisor specific to your situation. In the employee stock option plans that I have personally seen, you get regular income tax assessed between exercise price and current price at the time you exercise.  Your tax basis is then set to the current price.  You also pay capital gains tax when you eventually sell, which will be long or short term based on the time that you held the stock. (The time that you held the options does not count.)  I believe that other plans may be set up differently.

 <=SEP=> To me it depends on things like your net worth, debt, and how other assets are invested.   Currently you have 25K invested in the company you work for.   If you have 100K in student loans, are a renter, and 12K in your 401K, then I would recommend exercising almost all of your options.  In that case you have a much to large part of your world wrapped up in your company. If you have 250K in your 401K, own a home and have an emergency fund with no debt then you are fine with letting it ride.  You can afford to absorb a loss of 25K without wrecking your net worth. More than likely, you are somewhere in between (just statistics speaking there).  So why not exercise some of them now with the purpose of improving your financial situation?  Say do a 1/3 now and when they come available.   When 401ks were first invented people put almost all of their money in their company stock.  They lost just about everything when the company went down in value and were often a victim of layoffs exasperating the issue.  This is akin to the same situation.  Most financial advisers recommend against putting any 401K money to company stock, or at least limiting the amount.
Query: Why is early exercise generally not recommended for an in-the-money option?

Relevant passages:
 <=SEP=> Investopedia states: While early exercise is generally not advisable, because the time   value inherent in the option premium is lost upon doing so, there are   certain circumstances under which early exercise may be advantageous.   For example, an investor may choose to exercise a call option that is   deeply in-the-money (such an option will have negligible time value)   just before the ex-dividend date of the underlying stock. This will   enable the investor to capture the dividend paid by the underlying   stock, which should more than offset the marginal time value lost due   to early exercise. So the question is how well do you see the time value factor here?

 <=SEP=> The crucial insight is that the alternative to early exercise of an American call is not necessarily to hold it to expiry, but to sell it. And selling it, at its value, is always better than exercising it.  Note that this holds only for options on assets that don't pay dividends. Here's the proof, using Put-Call-Parity. We know that at expiry T, we have (using a Call and a Put both struck at K): C(T) - P(T) = S(T) - K (if this is not clear to you, consider the case where S is less than, equal to, or greater than K at maturity, and go through each of them.) If the stock S doesn't pay any dividends (and there is no cost of carry etc.), we can replicate both sides now at time 0; we just buy one call, sell one put (that gives us the left hand side), buy the stock, and borrow money so that at time T we have to repay K (that gives us the right hand side). That means that now, we only need to borrow df * K, where df is the discount factor, and is less than one (assuming the good old pre-2009 world where interest rates are positive). Thus: C(0) - P(0) = S(0) - df * K.  Rearranging gives: C(0) = S(0) - df * K + P(0).  That's the value of the call, if we sell it (or hold it). However, if we exercise, we only get: C_ex = S(0) - K Now, we see that C(0) > C_ex, because we subtract less (df*K < K), and add P(0).

 <=SEP=> For a deep in the money, it almost makes no difference because the intrinsic value, the price of the option, is seldom far above the liquidation value, the price of the underlying less the strike price. For an at the money, ceteris paribus, an early exercise would immediately cut the value of the option to 0; however, life is not so simple as JB King has shown. Purely theoretically, for an at or near the money option, an early exercise will be an instantaneous cost because the value after exercise is less than the previously trading or implied option price.
Query: How does a defined contribution plan work

Relevant passages:
 <=SEP=> "The end result is basically the same, it's just a choice of whether you want to base the final amount you receive on your salary, or on the stock market. You pay in a set proportion of your salary, and receive a set proportion of your salary in return. The pension (both contributions and benefit) are based on your career earnings. You get x% of your salary every year from retirement until death. These are just a private investment, basically: you pay a set amount in, and whatever is there is what you get at the end. Normally you would buy an annuity with the final sum, which pays you a set amount per year from retirement until death, as with the above. The amount you receive depends on how much you pay in, and the performance of the investment. If the stock market does well, you'll get more. If it does badly, you could actually end up with less. In general (in as much as anything relating to the stock market and investment can be generalised), a Defined Benefit plan is usually considered better for ""security"" - or at least, public sector ones, and a majority of people in my experience would prefer one, but it entirely depends on your personal attitude to risk. I'm on a defined benefit plan and like the fact that I basically get a benefit based on a proportion of my salary and that the amount is guaranteed, no matter what happens to the stock market in the meantime. I pay in 9% of my salary get 2% of my salary as pension, for each year I pay into the pension: no questions, no if's or buts, no performance indicators. Others prefer a defined contribution scheme because they know that it is based on the amount they pay in, not the amount they earn (although to an extent it is still based on earnings, as that's what defines how much you pay in), and because it has the potential to grow significantly based on the stock market. Unfortunately, nobody can give you a ""which is best"" answer - if I knew how pension funds were going to perform over the next 10-50 years, I wouldn't be on StackExchange, I'd be out there making a (rather large) fortune on the stock market."

 <=SEP=> It is comparing apples to oranges. From govt or institution point of view defined contribution is better than defined benefits as they don't have to carry obligations. Although defined benefit sounds good, one can't guarantee it will be enough when you retire compared to inflation. It often becomes political issue. Defined contribution puts you in charge.
Query: What does “profits to the shareholders jumped to 15 cents a share” mean?

Relevant passages:
 <=SEP=> "It means that the company earned 15 cents per share in the most recently reported quarter. Share price may or not be affected, depending on how buyers and sellers value the company. Just because profits ""jumped,"" does not mean the shares will follow suit. An increase in profits may have already been priced into the stock, or the market expected the increase in profit to be even higher. As the shareholder, you don't actually get any of these profits into your hands, unless the company pays out a portion of these profits as a dividend."

 <=SEP=> It's a way to help normalize the meaning of the earnings report. Some companies like Google have a small number of publicly traded shares (322 Million). Others like Microsoft have much larger numbers of shares (8.3 Billion). The meaning depends on the stock. If it's a utility company that doesn't really grow, you don't want to see lots of changes -- the earnings per share should be stable. If it's a growth company, earnings should be growing quickly, and flat growth means that the stock is probably going down, especially if slow growth wasn't expected.

 <=SEP=> "What does it mean in terms of share price? Should the share price increase by 15 cents?  No, but you're on the right track. In theory, the price of a share reflects it's ""share"" of time discounted future earnings. To put it concretely, imagine a company consistently earning 15 cents a share every year and paying it all out as dividends. If you only paid 25 cents for it, you could earn five cents a share by just holding it for two years. If you imagine that stocks are priced assuming a holding period of 20 years or so, so we'd expect the stock to cost less than 3 dollars.  More accurately, the share price reflects expected future earnings. If everyone is assuming this company is growing earnings every quarter, an announcement will only confirm information people have already been trading based on. So if this 15 cents announcement is a surprise, then we'd expect the stock price to rise as a function of both the ""surprise"" in earnings, and how long we expect them to stay at this new profitability level before competition claws their earnings away. Concretely, if 5 cents a share of that announcement were ""earnings surprise,"" you'd expect it to rise somewhere around a dollar."