Catalysts
Research In Motion Ltd (NASDAQ:BBRY), Netflix, Inc. (NASDAQ:NFLX), and Tesla all have one or more products that are critical to future success in the eyes of investors. The BB10 phones are what BlackBerry investors will be watching on June 28 to see sales rates and acceptance levels. Like Research In Motion Ltd (NASDAQ:BBRY) investors watching phone sales, Netflix, Inc. (NASDAQ:NFLX)investors are watching the popularity of the company’s Internet TV service. After a price change debacle, Netflix is regaining interest among investors, and on two separate occasions these bullish investors benefited from short squeezes on the stock, causing it to rise from the double digit range to above $200 a share today.
When investors think of a company with a lot riding on a single product, Tesla Motors Inc (NASDAQ:TSLA) has to be near the top of the list. Investors were looking for both an increase in production numbers and a reduction in production costs. The reduction in production costs was largely expected, but when the automaker beat on earnings and revenue, shorts were squeezed moving the stock from the $50 range all the way to a high of nearly $115 before settling back at around $100.
In both the Netflix, Inc. (NASDAQ:NFLX) and Tesla situations, investors “doubling up” would have won (although, as previously discussed, not many Tesla investors were in the red at the time) as the short squeeze scenario played out. But results could easily have gone the other way, leaving “doubling up” investors holding the bag. And that is an important consideration. “Doubling up” is another way to double both risk and reward. Investors should not “double up” when they cannot handle the downside risk because the results of both Tesla and Netflix, Inc. (NASDAQ:NFLX) could just as easily have turned those “double ups” into double losses.
Using “double up”
“Doubling up” allows investors to realize capital losses that would otherwise be treated as wash sales for tax purposes. In a wash sale, the loss is still out there to be claimed but is not part of realized gains/losses and only adds to the basis of the repurchase. If investors are considering using a “double up” on a stock such as Research In Motion Ltd (NASDAQ:BBRY) they need to be sure they meet the ideal criteria: They a) can handle the added risk of owning twice the number of shares, b) they have an unrealized capital loss on the stock, and c) they are neutral to positive on shares in the near-term. Investors meeting all three of these criteria may want to consider this strategy considering both the risks and rewards.
Alexander MacLennan owns shares of Research In Motion Ltd (NASDAQ:BBRY) and Tesla Motors Inc (NASDAQ:TSLA). He is not a tax professional and the following information has been gathered from various third party sources for the purpose of this trading opportunity. While the information presented in this article is correct to the best of his knowledge, investors are advised to consult a reputable tax professional before making investment decisions. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. The Motley Fool recommends Netflix and Tesla Motors . The Motley Fool owns shares of Netflix, Inc. (NASDAQ:NFLX) and Tesla Motors Inc (NASDAQ:TSLA).
The article An Interesting Trade Ahead of June 28 originally appeared on Fool.com.
Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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