BUSY WEEK WITH A NEW ONLINE BROKER

A Busy Week

    This has been a busy week in the stock market for me. First, I changed Online Brokers. I have used E*TRADE since 1998 and had been very happy with them. Over the years they changed and as far as I am concerned, their service gone downhill. Earlier in my relationship with E*TRADE, when I transferred money by ACH from my bank to E*TRADE, the money was available immediately. This service changed. I have had to wait for up to ten days before I could use the money I sent to them. This was my main reason for being dissatisfied with their service. I had considered Scottrade for some time. I had considered making the change for a long time but I was not sure about the research capabilities of Scottrade. I must say I was pleasantly surprised. Not only are their research materials as good, but I consider them better. I am glad I made the change. To be sure I would be happy with their online abilities, I traveled to Knoxville, TN to meet with personnel in their office and see firsthand how their systems worked. At the end of our session, I gave them a check to begin my account. Beginning with the day after opening my account, I was able to start making trades. They also advised me that ACH transfers only take three days to clear and after January 31, 2008, ACH transfers will be usable immediately. Needless to say, Scottrade was happy to assist me in transferring my account from E*TRADE, to Scottrade. In fact, they did all the paperwork for me while I was in their office. The only hang-up was, E*TRADE held onto my money for about eight working days.

     I had only opened my account with $5000.00 at Scottrade, so my trading ability was limited. Anxious to begin using my new account and learn my way around their website, I made a couple of hasty trades. The first trade I made I should not have bought, but mistakes will be made when you are trading in the stock market. You must learn how to make the best out of a mistake. On Friday, January 11, I bought 600 shares of Country Wide Financial (CFC). I paid 6.69 per share for the stock. Immediately the stock began to go down as bad news came out. I made other trades and by Thursday I had profited $1026 in my new account. I am going to skip some of those trades but I will tell you what I did about CFC. As CFC dropped, I bought 400 more shares of the stock and paid 5.75 per share. I later wrote a covered call on the 1000 shares at the $5 strike price for $.75 per share. After commissions and fees for the trade my net on the options was $730.50. I can look at these two ways. I can write myself a check for the $730 and spend the money or I can consider this money as reducing my investment in the Equity CFC. My investment now is $5.79 per share. My loss will only be minimal if the stock remains above the strike price. I more than made up the difference by buying "PUTS" on several stocks and when the equities went down, sold the options at high profits.

WHAT IS A DAY TRADER

    I am a day trader. To me, long term means holding equity until the next day. I especially do not like to hold a stock over the weekend and if the weekend happens to be a holiday weekend I want out of all my holdings. For a beginner, this can be a problem and one the broker may not tell you about. If you make three day trades within five days you are labeled as a day trader and will receive a warning letter the first time this happens. The second time you make such trades you will be restricted in your account and will have to wait until you have ample cash in your account or until your trades are settled. The irony is, if you have $25,000 in your account, you can day trade all you want. This is an easy way to make money. Just find stocks moving a nickel every few minutes in a pattern and begin trading in multiples of 2 or 3 thousand shares. It works. Buying options can also be completely cycled within one day. I do this on a regular basis.