Sunday, March 28, 2010

Long time no trade



So dear readers,

I was pretty lazy over the past two weeks due to two reasons:
First, I just started a new job, which basically took away all of my time and second, well almost nothing happened.

So what did happen?
As you see my portfolio has decreased and I am currently in the red zone.
How come? Well for one thing, I have sold my Fiat stocks (it was more of an automatic limit sell, but well whatever) and made some 100 Bucks or so and as you can see I have something in my portfolio that has no value.
What's that? These are options on new stock. DIC Asset AG decided that it would be kinda cool to issue more stocks. Firms do this either because they need money, or like in this case, because they think in the near future the time is right to purchase a couple of objects and therefore put money aside.
So what happens when a company issues new stocks? First of all, the stock price falls dramatically, because now there are more shares and this means that all money that is earned has to be split among more shareholders. In a nutshell: your piece of the cake gets smaller.
But there is a certain law that provides shareholders from being ripped off:
If new shares are issued only the old shareholders have the right to buy them. Often enough new stocks are issued well below the current market price, and so you can either buy the stocks or you can sell your right to buy new stocks to someone who wants to.
As I do not want to reinvest in that company, I will choose to sell my right tomorrow hence generating an instant cash flow of something between 40 and 60 €.

In the end this means that I am not really losing money, although the picture above tells something else ;)

Keep reading cause these days could be somewhat exciting in terms of stock trading!

No comments: