Here's our Club Mailbag email investingclubmailbag@cnbc.com -- so you send your questions directly to Jim Cramer and his team of analysts. We can't offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries.
Rapid-Fire Mailbag Commentary
"Is there a way to see how time is eroding my option trade as it nears expiration? Thank you." -- Richard L.
To see how time is impacting the price of your options, you'll want to be mindful of "the Greeks" which are a set of measurements used to value options. Delta measures the rate of change in option price for a $1 move in the underlying security. Theta measures time decay, indicating how much an option's price declines as it approaches expiration. If an option has a theta of 2, expect that option price to decline by $2 per day, all else equal.
"How does an investor know if when buying stock, they are buying company shares or trading shares with other investors?" -- Dan M.
For the most part, when buying and selling stock, you're doing so with other investors through secondary markets like the New York Stock Exchange and Nasdaq. The primary market involves companies first selling shares via initial public offerings (IPOs) or secondary offerings.
"I would like to earn dividends. How can I know if a company will pay dividends and how much they will pay?" -- Michele T.
You can determine if a company pays dividends by checking its yield or dollar payout through data brokers like FactSet or analyzing recent financial releases such as quarterly reports or 10Q/10K filings. To assess dividend sustainability, evaluate whether ongoing operations support further payouts.
Investment Questions from Felix M.
- Investing in High-Priced vs Low-Cost Stocks: Price is what you pay; value is what you get. Focus on valuation rather than stock price alone using methods like discounted cash flow models or price-to-earnings ratios.
- Share Count for Potential Results: Share count doesn't matter; focus on total money invested since market moves are percentage-based rather than dollar-based.
- 401k vs Stock Investment: Understand that accounts like 401(k)s have unique attributes but aren't investments themselves; stocks can be purchased within these accounts offering tax advantages over regular brokerage accounts.
- Quality vs Quantity in Trading: Focus on quality trades rather than quantity; buy high-quality companies and let fundamentals drive stock performance instead of timing market swings.
- Selecting Inexpensive Stocks: Investment analysis requires continuous learning and risk management; don't get discouraged by initial setbacks but stay engaged to improve skills over time.
"When you trim a stock, do you pick from the oldest buy (long over a year) to maximize profit but raise basis... Or sell more recent stock (short under year) so rebuy at lower level lowers basis?" -- Rich B.
The Investing Club sells based on first-in-first-out (FIFO), meaning oldest shares are sold first due to lack of tax implications for Charitable Trusts compared with individual investors who should consult tax advisors regarding share sales outside tax-advantaged accounts where minimizing taxes matters more than maintaining attractive cost bases.
Your goal should be minimizing taxes while considering exposure levels after booking profits from positions such as deciding whether trimming involves raising cash amounts versus leaving remaining exposures intact going forward.
(See here for full list Jim Cramer's Charitable Trust stocks.)