I was thinking a lot about thesis yesterday and how it isn’t just for essays. When I think about the ideas I put into investments and the thesis’s behind them I start examining myself. Being honest with ourselves is one of the hardest things to do. We like to think we’re smart, but we’re also human and have the same flaws as everyone else.
Humans are very good at rationalizing. We make decisions emotionally. I can say FOMO and YOLO aren’t investment thesis’s but that doesn’t make me immune from them. My best investment decisions have come from simple noticing. A few years ago I noticed that Facebook stock was suddenly in the $90s and I bought some. After it hit $500 and I sold I regretted not buying more, but not that much.
Right now I am sitting on a bonanza. Today is either going to be a good day, a great day, or one I will talk about for the rest of my life. All because I noticed Amazon stock was falling into earnings. A week before I noticed that a Microsoft LEAP at a strike of $500 would be a good thing to buy and decided to wait as I didn’t have the money to buy it at that moment. That thesis has not passed, but is also likely out of my price range again with Microsoft’s recent run.
But I did have the money for a shorter dated Amazon contract with a strike of $250. My theory was all I need Amazon to do was rise from $233 to $240 and I would collect a couple hundred dollars and be happy. I almost did it yesterday as Amazon started rising into earnings and then I looked at what Microsoft had done after its earning’s beat and said, wait a minute my friends. Let’s not act in haste here.
I decided to wait, and that is looking like a real good decision right now. The only question for today is exactly how much money I’m going to make and how long I wait to pull the trigger on it. An option contract I bought for $560 is now estimated to be worth close to 4X that, heading to 5X, and we’re still three hours from market open when the real buying will begin.
The big thing to remember is even if the price drops instead of rising today my original purchase price was $560. It is unlikely to head below that, and if Microsoft’s run is any indication I could be looking at a real good day. Real good. Add into that that the new Amazon facility likely netted me an additional $1100 in rent on a property and the 79 additional Amazon shares I own at a cost basis of $240 and no company has done better for me this year. Not even my own.
David Huzzard Writes 