Pandora will, without much of a sweat, survive an Apple challenge, but, even if it never happens, persistent Apple rumors and other noise will continue to hit the stock.
My ground rules for owning this type of name:
- Consider it a long-term speculative play. Define long-term in multiple years, not months.
- Look away for no more than 10 to 15 trading days, preferably fewer.
- Allocate no more than 5% to 10% of your portfolio to the stock. How much depends on your risk aversion, size of portfolio, income, etc.
- Write at- or slightly in-the-money calls against at least 50% of your position.
- Sell at least 50% of your position on pops (like the one we're seeing now) or simply watch shares get called away.
- Add to your position on dips, such as the one Pandora just rebounded from.
If Pandora ends up being for real and takes off (I think this happens over the next one to three years), you'll have a starter position you can more confidently add to. If it doesn't, you probably will not have hurt yourself too badly.
Before I became a full-time employee of TheStreet (company policy prohibits full-time editorial staff from owing individual stocks with the exception of TheStreet (TST)), I exited a position in P. Even with a cost basis of $10.19, I closed the position just above breakeven thanks to covered call writing.You can own Pandora. If you have well-thought out, long-term conviction when others are bearish, it's the type of stock that can pay off in a big way over the long haul (see, e.g., Sirius). However, you must not be a passive shareholder. Buy on dips, sell on spikes and write covered calls. Don't go overboard. That type of moderation might keep you from making a killing, but it, more often than not, it will keep you from getting killed. Follow @rocco_thestreet --Written by Rocco Pendola in Santa Monica, Calif. Pendola is long TST in multiple accounts.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV