The Weekly Trader

I wrote an article about the pros and cons of penny stocks for Marketwatch, which you can find here: http://bit.ly/wl7S1r

My article is one of the most popular today. In my article, I didn’t include the following information: The penny stock that is being touted by newsletters and on email is NSRS (North Springs Resource Company). Although this dollar stock is on a roll right now, the good times will eventually end. After being up as much as 25% a day on some days, if you made any profits on this penny stock, take the money and run.

Every week, I receive a lot of letters from readers about my books and articles. I answer all the letters, and usually don’t post them. However, in my latest article for Marketwatch, “5 Trading Strategies If You Have Less Than $3,000,” (http://bit.ly/tzoP3J) people left over 150 comments. Many wrote that college students had no business learning about the stock or options market.

Then I received a letter from Daniel Dombroski from the University of Connecticut. As you’ll see below, Daniel has been successfully trading options while going to school. Although it’s not easy, it is possible to make money with a little money. I’m sure that more than a few financial firms will be interested in speaking with him about a job or internship.

Here’s his complete letter to me:

My name is Daniel Dombroski, an undergraduate student at the University of Connecticut. I read your article, “5 trading strategies if you have less than $3,000”, and laughed a little when I read your suggestion on implementing option strategies. I started trading options about three years ago, right out of high school. The markets have been less than friendly over the past few years to many investors and traders but this increased volatility has provided many profitable strategies utilizing options.

My experiences over the past few years have provided me with many unique opportunities, the most important of which is my understanding of the markets. Comprehending and capitalizing on movements has differentiated me from other students who are simply being lectured in the class room. This is a huge competitive edge in the minds of other traders and potential employers. I have also been given the opportunity to educate other students about options trading and how creating a well planned strategy can protect investments in ways simply buying and selling equities cannot accomplish.

I fully support students learning about options and how they can protect and leverage themselves when using a well thought out, discipline trading strategy.  What is important to point out is that results will reflect how the trader views options . If you treat this vehicle like gambling then your account will reproduce similar results. You may win in the short run but the house always gets its money.

As a disclaimer, my primary trades are credit and debit spreads to generate steady income. Correct sizing allows me to adjust my positions accordingly. I plan on continuing to grow and adapt my strategy and rules over time to reproduce results I am comfortable with.

In short, thank you for recognizing this investment vehicle for people with small accounts (particularly college students.) I look forward to reading more articles that encourages eager young prospective traders my age to take active steps in creating their own financial independence and securing a profitable future.

Warm Regards,

Daniel Dombroski

Update December 7th: The only error in this article is that in reality, even though it was homecoming weekend, many Colgate students attended my seminar. I was amazed at the interest they had in the stock market even during homecoming. By the way, Colgate beat Cornell in overtime. (Note: Photos below)

Right now many people are negative about the stock market, and believe that you should avoid the market completely. I believe, however, that it’s a good time to learn more about the market, and studying costs nothing. If the only money you have in the world is $3,000, by all means pay off debt or keep it in a savings account. But if you do have extra money that you can “afford” to lose, then you can use it to invest in the stock or options market.

When I went to Colgate University in Hamilton, New York to teach a seminar on “Understanding Stocks,” “Understanding Options,” and ways to avoid investment mistakes, I spoke with Josh Lasker, chairman of the Stock Trading Club and an executive member of the Colgate Finance Club, and William Civitillo, president of the Finance Club.

The finance club, with over eighty members, was created to “take Colgate students and educate them about the world of finance and the careers they might be interested in,” says Civitillo. “We want to help them to make the most money in the future, and find happiness.”

William Civitillo says they try to make the club fun, and often bring in people to give insights about the financial world.

Josh Lasker first got interested in the market when he was fifteen years old. “I saw the market was volatile in 2008, and I saw the markets tank,” he says. “My father’s partner said that you don’t have much to lose when a stock is already down 90% and you are only throwing in 140 bucks. That’s when I bought 1,000 shares of Sirius at $.14 a share and sold at $.54. Then it went over a dollar.”

What did he learn? “I learned that anything can happen in the stock market,” Lasker says. “Even a big company can go bankrupt.”

Below are photos of the beautiful Colgate campus and of me teaching:

Colgate University

Colgate University

Colgate University

Colgate University

Colgate University

Colgate University