The next problem was what to do. There must be a different way. Could I improve
my approach to the
option market? It had been proved to me that it was wrong to
listen to nightclub customers, headwaiters, stage-hands. They were
only amateurs like myself and, however confidently they offered
their tips, they did not know any more about the option market than
I did. I gazed at page after page of my brokerage statements from
the option market, which said: Bought 90 cents, sold 82 ... Bought
65 cents, sold 48
Who could help me to discover the secrets of the option market? I had started to read Canadian financial publications as well as Canadian option tables. I had begun increasingly to glance at advisory news sheets, which gave tips about stocks listed on the option market.
I had already decided that if I was to keep pursuing the option market, I would need professional help, so I subscribed to some advisory services that gave financial information about the option market. After all, I reasoned, these were the experts. I would follow their professional advice and quit buying option on the odd tip from a stranger or an amateur option-fancier like myself. If I followed their skilled, sensible teaching, I must succeed in the option market.
There were financial advisory services that offered a trial subscription of
four copies of their information-sheets for one dollar. You could
have these as a goodwill taste before you began seriously to buy
their valuable service. I put down a dozen or so dollars for trial
subscriptions and eagerly read the sheets about the
In New York, there are reputable financial
services, but the Canadian sheets that I bought were strictly for
the sucker trade. How was I to know this? These financial advice
sheets delighted and excited me. They made the option market speculation
sound so urgent and easy.
They would come out with huge headlines saying:
"Buy this option now before it is too late! " "Buy to the full extent
of your resources!"
"If your broker advises you against it, get rid of your broker!"
"This option will give you a profit of 100% or more!"
This, of course, seemed like real, red-hot information. This was much more authentic than the odd tip picked up in a restaurant.
I read the option market promotion sheets eagerly. They were always filled with much unselfishness and brotherly love. One of them said:
"For the first time in the history of Canadian finance the little fellow will have the fantastic opportunity of getting in on the ground floor of a brilliant new development.
"The plutocrats of Wall Street have been trying to acquire all the option market shares in our company, but in clear defiance of the evil traditions we are only interested in the participation of investors of moderate means. People like you... "
But this was me! They understood my position in the option market exactly. I was the typical little fellow to be pitied for the way he was pushed around by the Wall Street plutocrats. I should only have been pitied for my stupidity.
I would rush to the telephone to buy the option they recommended. It invariably went down. I could not understand this but I was not the slightest bit worried. They must know what they were talking about. The next option must go up in the option market. It seldom did.
I did not know it but I was already coming up against one of the great pitfalls of the small operator - the almost insoluble problem of when to enter the option market. These sudden drops immediately after he has invested his money are one of the most mystifying phenomena facing the amateur. It took me years to realize that when these financial tipsters advise the small operator to buy shares in the option market, those professionals who have bought the option much earlier on inside information are selling.
Simultaneously with the withdrawal of the inside-track money, the small sucker
money is coming in. They are not firstest with the mostest, but
lastest with the leastest. They are far too late to enter the
option market, and their money is always too small to support
the option at its false high point once the professionals are out.
I know this now, but at that time I had no idea why shares behaved like that in the option market. I thought it was just bad luck that they dropped after I bought them. When I look back I know that I was all set at this period to lose everything I had.
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