I’m currently reverse-arbitraging a 0% credit card promotional rate that is set to expire on 10/28/09. As of 5/31/09, my credit card balance is $11,574.08, and every month, I pay $122 to my credit card company and stash away $931 into my DollarSavingsDirect savings account that pays 2.0% APY in interest. I’ve so far saved $4,313.08 and at this rate, I’ll be $2,000 short in paying off my credit card balance by October.
I was never worried about the shortfall since knew I was going to make it up by selling some of my company stock that I’ve purchased through my company ESOP plan. The only open issues were: (a) when do I sell my company stock and (b) at what price? I was hoping that I could sell 7 shares for about $285 - $290/share. If so, I can make a small profit AND pay off my credit card debt.
But as they say, the best laid plans of mice and men go oft astray. *Sigh*
Right now, the stock is trading in the $250 - $265/share range but it looks like it’s incrementally trending lower. It also looks like options traders are buying protection between $230 - $280/share range with the October contracts. Great. I potentially have a $20/share downside or a potential $30/share upside if I wait.
I’ve always said I suck at stock trading. (I suck worse at dating, but that’s a topic for whole ‘nother blog.) And to be fair, Peter Lynch allegedly said something to the effect that a good stock picker will only be right six times out of 10. The corollary is that a good stock picker will also be wrong four times out of 10.
Since I can’t predict the future and I need the money, I decided to bite the bullet and sold 8 shares of my company stock for $250.79/share. My total net loss from this transaction is $305.98. I generally don’t like selling stocks (especially good stocks) at a loss, but I’m not too upset about it. Why?
- Money I need in the next 5 to 10 years, much less money I need in the next 4 months, shouldn’t be in the stock market.
- I can harvest the loss from this sale to reduce my capital gains tax on a $405.91 profit I realized in a prior stock sale earlier this year.
- Since I purchased the stock through an ESOP, my actual contribution was $1,409.72 (and my company matched $896.59). So if you only take my own contributions into account, I’ve actually come out ahead by about $596.60 (minus taxes I paid on the company match.)