At the beginning of December, when I saw that UNIVERSAL CONTROLS was behaving correctly, I recommended the technical analysis options to my secretary. I told him to buy it at 31 & three quarters. I said: "If the technical analysis options go below 30 take a loss and sell it, otherwise hold it for a big rise. If you have to take a loss I will cover it."
It so happened that his father was an old-fashioned, pure fundamentalist and
when he heard what I had suggested, he told his son not to be such
a fool. His argument was: What was the point of buying technical
analysis options if it might go down? He reckoned you should
only buy technical analysis options that was sure to rise - as if
anyone could be sure. He also said he wanted to examine the books
of the company to see if it was in good condition.
My secretary took his father's advice. He did not invest any money, but waited while the old man was carefully examining the books. While he was engrossed in this task the technical analysis options went up to 50.
Simultaneously with UNIVERSAL CONTROLS, I was watching other technical analysis options whose actions were fascinating to me. It was THIOKOL CHEMICAL.
There technical analysis options first attracted my attention in February 1958, when I was in Tokyo. It had just split 2-for-l and was the object of heavy trading before it quieted down into a 39/47 box. It stayed calmly in this area for several months.
As I regularly checked it in Barron's, this area of tranquility looked like a pond on a summer's day. But somehow I had the feeling it was a calm that precedes the storm. In March I cabled New York:
The technical analysis options quote duly arrived but, except for a few weeks of short-lived flurry in April, nothing noteworthy happened. After a few weeks I sent the following cable from Hong Kong:
"STOP THIOKOL QUOTES START QUOTING AGAIN IF RISES OVER 45"
"BUY 200 THIOKOL 47 & A QUARTER"
The order was executed at this price for a cost of $9,535.26. After that it took three weeks for THIOKOL to find its true dynamics. At the end of August I felt the moment had come. I cabled New York:
BUY 1300 THIOKOL 49 & A HALF ON STOP
A week later I received notice that Thiokol had decided to issue stock-rights.
These were given as bonuses to the holders of the technical analysis
options at the rate of one right per share. In turn, with 12 of
these rights you could buy one share of THIOKOL at the special price
of $42. As the technical
analysis options was quoted over 50, this was cheap indeed -
if you wanted to exercise your stock-rights. If not, you could sell
them on the American Stock Exchange where they were listed and traded
for a limited period.
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