"free shares"

Why do you think this is a stupid idea, and what don't you get?

Jaz you are to fast for me.....

once your initital investment is back in your pocket, the shares you own are then free. You paid nothing for them.

That's what my GF says too...

It's stupid but you don't get it?


If I have 100 shares of a stock I bought at $1, as soon as I can sell enough shares recoup my initial investment, the rest are then 'free' so to speak. Sell 50 at $2 and there's my $100, then I have 50 free shares.

I can tell from your new avatar

Risk reduction is all it's for. If the stock goes to crap, no loss. If it goes to the moon, woohoo!
Not really a moneymaker.

I've never vacillated when it comes to free shares... I mean, I'm the kind of guy that buys or sells in a maximum of 2 lots... and I don't really do the free shares things. If I think a stock is going to pullback, then I sell it all. If I think it is going to continue upwards then hold it all.

Maybe scale out 1/2 near when I think the stock is peaking, but looking back on my trades, usually I end up being right when I sell, so I've started selling it all...

For SQNM, I would either sell it all, or hold it, unless I get disgusted that no news is coming out (maybe in a month or so)

g

I disagree on this "free" mentality, and here's why...

You've risked capital for the shares. They are not free. You've "paid" for them by subjecting your capital to risk in the market.

If you bought a stock and it went down, would the loss be something you "paid" nothing for as well? ....Do you see the logic problem here?

By selling some of your position that happens to equal the initial book value of your trade, you are simply limiting your downside risk to the break even point. Reducing risk this way comes at the cost of reducing further upside gain, which if you're keeping track, is another cost of locking these "free" shares.

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Don't get me wrong, this risk reduction strategy is a decent way to protect gains, free up capital, all the while letting your winners run. It's a good play...

...but please, whatever you do, try not to think of the remaining shares as "free". You've paid dearly for them.

I do it a LOT with the div paying stocks, adds up over time...

Depends on your goals. I'm working on my roth acct, made 3 trades so far-have all my money back and have FREE shares in my account. All 3 free stocks pay dividends. My goal is long term for my retirement, instead of buying and holding I like to sell with the spikes, so basically I am daytrading my way up.

Well I for one have always agreed with the OP here. Free shares aren't free. I like to keep my profits if possible, so even if I ride "free shares" and lose 50% I've lost something, rather than gained something.

Maybe it's a glass half-empty approach.

Nothing wrong with the concept though. You should always use protection. From losses.

Basically what it is, is that once it is "free", you can excersise as much risk as you want. But, by the principle in economics (sunk cost), it ain't, and you should play with them as you normally would.

Whatever works though

Is this a semantical debate or a strategic one? Half the people seem to have a problem with the term "free," others are relating it to their style of trading.

"free" shares are for fools....u risk cash money to gain those "free" shares......shares=cash. Cash ain't free

"Free shares" are the best form of a "realized" trailing stop or stop loss for extreme penny stocks, imo.

For me, due to Scottrade, this is any stock under $1. I can't have an open trailing stop, stop loss, or stop limit order on stocks under $1 so selling half or whatever and riding "free shares" is how I protect my capital/gains if the trade goes the other way...which can (and does) happen very quickly.

I have a day-job so trailing stops and the like are kind of necessary; you're situation may be different. I trade expected news or catalysts and taking money off the table ASAP is part of my strategy.

"Freebies" don't have to be bad and I don't think they are for penny stock trading. I do agree that there are better methods out there (like trailing stops), but sometimes those aren't available...

Did it today with VMC (one of my regular plays) went ALL IN, sold at the top GOT ALL my cash back plus kept the profit (seems to be a more appropriate word for the play) in shares. The PPS of the FREE shares will flucuate daily- 2 ways of looking at it, Could have sold ALL OUT and kept the profit /or/ since they are profit the dips dont concern me because I'm holding them LONG TERM.. One should choose the type of plays that suits their needs..

I guess it depends on how you trade, once you get those 'free' shares...

IMO, the only way I would do it, would be if I would be willing to sell those 'free' shares after they ran up another, say 20-30% from where I last sold the other shares. Of course this 20-30% number totally depends on the scenario... whether it is a breakout, a bounce, or whatnot.

So what usually happens in the types of plays I am using is that if I sell the second 'batch' of shares, they will happen probably within a day of my previous sell. If the shares go back to the highest previous sell price, I will also sell.

Ex: If DRYS runs to 10, and I sell the majority of my shares and are holding say 100 'free' shares, then if they run up to 12, then I will sell them. If they fall back under 10, then I will sell. If nothing happens within 1 day, then I will sell.

g