Why the Martingale Strategy Should Not Apply to Stocks - Cabot Wealth Network


  • Andrew S.

    On occasion, if I have acquired a small stake of 50 shares of a dividend paying stock trading at 100, I will consider buying another 50 if selling at 50, as having 100 shares will enable me to sell a covered call while continuing to collect the dividend, managing the position back to profitability. I might do this “double down” the one time, particularly if the general market has tanked nearly everything. That way I can have at least some confidence that the stock has been ‘undeservedly’ dragged down.

  • I go by the analysis that a drop in value of 50% requires a 100% increase over the remaining value. Does this make sense in detering one who is tempted to go for broke?

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