By November 3, 2005

Playing the stock game

Oh, this was a bad door to open.

I don’t want to say I don’t have much faith in the company I work for, but particularly after taking on my current role, I realize that we do a lot of stuff poorly. I can’t believe that a world-class, multi billion dollar company doesn’t have a modern user interface development process, or even a unified modern software engineering development process. Our quarterly earnings came out last month, and they were good — resulting in some good press from brokers and a slight bump up in our stock price.

Now, having survived the dot-com wars, I know that buying (and holding) stock in the company you work for is a bad idea. Take Bad Man James, a UNIX admin I used to work with, for example. He exercised his options with the startup he worked. He had to hold onto the stock for six months before they fully vested. In the fifth month, Bad Man James was stuck in San Francisco on a bridge in rush hour traffic when his pager started blowing up. His stock was falling, and his online trading service was cautioning him to sell. Except he couldn’t. One because he was on a damn bridge (although I guess he could have called in his order) and two because he wasn’t fully vested. His employer had basically lied about their capabilities, and they got busted. Bad Man James’ paper wealth went from over a million dollars to practically nothing.He wound up taking a bath and owed the government over $120,000 in taxes that he was barely able to reclaim.

So anyway, after watching the rise and fall of many dot-com companies first hand (and working for quite of few of them), I told myself I would never buy stock for any company I worked for or worked with. That is, until my current employer gave me X amount of stock to exercise at a good strike price (discount). Due to some financial black magic, my options were immediately vested. I started playing around with the same-day-sale calculator, but didn’t figure my stock would ever be worth enough to mettle with. Until, of course, our quarterly earnings came out, and for the first time in the almost 3 years I’ve worked for my current employer the stock price jumped up. Hey, maybe I should see what flipping my stock would earn me!

It turned out it was a fairly interesting amount of change — enough to pay off some debts and pave the way for even more financial irresponsibility. I thought about selling, but had never done anything like this before. When I started thinking about getting rid of my stock, it was at $24.30. I put in an automatic sell order — if the stock reached 24.50 a share I’d sell. At the end of the market day, the stock was down to $24.11.

I discovered something exhilarating and awful: watching stock prices go up and down and playing with financial calculators to determine profit and loss. When the market opened the next day, I whooped when the stock went up even a few pennies, and booed when it fell back down. Determined not to lose another 30 cents a share, I sold at $24.00 flat. I had lost a few thousand (pre-tax) dollars, but I figured that since this was “free money” I wouldn’t cry over spilled milk.

Until I heard that my employer was getting a large government contract. The words “hold onto any stock you might have” came out of one of my co-worker’s mouth. Shit.

I checked our stock price today: $25.27 at the high, almost beating the best performance of the year, and over $2 a share beyond the one year target estimate. The financial difference isn’t small peanuts: over $3000, but the real twinge in my gut is that I sold when I should have held. Of course, I could have easily held and the stock could have taken a shit. But that’s the joy and the pain of dicking around with the stock market.

In the time it’s taken me to write this, the company’s stock went from $25.36 to $25.15 to $25.22. Craziness. I hit F5 again to see what’s happening now.

I have to stop checking Yahoo! Finance.

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1 Comment on "Playing the stock game"

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  1. configuratrix says:

    Stocks can be heartbreaking, and I think day-trading can be disastrously addictive. My dad brought us up to look for good stocks (growth opportunities, but not fads), buy, and hold. That’s so not what he’s doing now. Well, at least not the “hold” part.

    I’ve sold a few stocks I had, some out of morals, some out of tidying-up, and one out of “this bubble can’t last” (and it didn’t; I only wish I’d sold more, and not worried about beating the tax hit by waiting longer). The rest, I’ve held onto.

    One other good piece of advice my dad gave was, if you can’t decide whether to sell or not, sell SOME (20-50%). Then see how it feels a day or so later, and decide whether to sell the rest or hang on a while longer.