positive for now, i like the canadian dollar as well. short term. >> that's it for us. remember your next chance to make a currency trade sunday afternoon. see you afternoon. see you back here at 5:30 eastern time. i'm jim cramer and welcome to my world. >> you need to get in the game! they're going to go out of business and he's nuts! they're nuts! they know nothing! >> "mad money," you can't afford to miss it. hey, i'm cramer. welcome to "mad money." other people want to make friends, i'm trying to save you some money. so call me at 1-800-743-cnbc. after a solid day for the markets, what happens to be our game plan for next week? [ whistle blowing ] we're going almost all europe. while they have a july fourth over there, they don't celebrate it. first off next week is the last

week before we reach earnings season. listen up. i need you to use any strength to lighten up on technology stocks, industrials, and any brokers or banks that do a lot of international work. minerals, mining. further, if we get any lift in oil and gas, please, please, please lighten up on the complex, particularly the drillers, because it will be some of the most down beat reports when they give you their quarters and many oil companies will scale back some of their plants, although not all, particularly deep water projects. they can't be turned on and off on a dime. witnessing yesterday's suggestions that you pick up some bed, bath and beyond, obama care, these are all changes that will make it feel like that health care will be a place to be. in the second half of the year.

here's your day-to-day game plan. monday, we get the june institute of supply management. so many people buzzing about this. the word on the street is that this number will be severely disappointing, bordering on recessionary? perhaps more important, though, here we go, the german pmi, the german manufacturing index. why? we need the germans to start feeling the pain of the rest of europe. so far that's not been the case. they've been -- >> house of pain! >> house of pleasure. >> maybe a weak pmi number will jar them. tuesday, we got something to look forward to with june auto sales.

i think the june sale will remain strong. when you hear these numbers, many of you want to buy gm and ford because they're so far down. understand a long time ago, moving into europe and latin america, that's what is driving these automakers and driving them into a retaining wall. do not be tricked into buying their stocks off of american sales numbers. and lately truck sales have been horrendous, because the biggest buyers of trucks have been oil companies. i don't like navistar. and you need to wait until the quarter to buy cummings, which isn't down enough. wednesday brings us eurozone

retail sales. right now in spain, they are talking about raising the retail sales tax. i think that would be disastrous, given how weak the spanishx!i

>> so while i expect the industrials to be hammered by this number, i think they will

catch a bid the following monday. i don't want you to buy any industrial stocks. the numbers are too high. next week is the last one before earning season kicks off, so use any strength to sell stocks because the techs, the banks, the oil and gas names, and keep an eye on europe, where the fourth of july is, unfortunately, just another sorry day of the week over there. let's go to hans in georgia. hans? >> caller: yes, boo-yah jim, from atlanta. how are you? >> good. how about you? >> caller: great, thank you. my question has to do with interest rates. are interest rates determined by the federal reserve and their policy or more determined by the bond market? and a quick followup, can you explain what an inverted yield curve is? >> funny you bring this up, because a lot of people feel the fed could do more to lower the rates. the fed wants low rates, but

it's the market driving the numbers, because there's not a lot of loan demand and money is coming in from all over the globe. inverted yield curve, you have the higher rates at the short end. you don't have to worry about that. we've got a regular yield curve going on here and nothing you need to worry about. >> let's go to anthony in pennsylvania. anthony? >> caller: a big philadelphia boo-yah! >> i'll take that. what's up? >> caller: my question is a two parter? general, how do you feel first about the direction on short, mid and long-term gold prices? and secondly, i'm sure you believe as i do, gold should be an integral part of anyone's diversification, so what do you see having better upside, an etf that tracks gold like gld or an etf that tracks mining stocks? >> i'm so glad you asked this.

the trade is usually good for 48 hours. it should be part of any port foli folio. so if the germans do the wrong thing, you can buy a little more later. but up to 20% of your portfolio can be gold. let's go to gray in california. >> caller: boo-yah, jim. i've been watching your show lately and you've been pushing stocks with limited exposure to foreign countries. i was wondering with google coming out with their new tablet here in the united states, would that be a good play? >> no. google has an amazing amount of business in europe. they've moved so aggressively in europe. so no, that is not a reason to buy google. google is much more europe. next week, it may be america's

birthday. but guess who is in control again? it's europe. beware of the international bankers. the buyers must be. don't miss a second of "mad money." follow at jim cramer on twitter. have a question? tweet cramer. send jim an e-mail to "mad money" at cnbc.com or give us a call. miss something? go to madmoney.cnbc.com. [ male announcer ] introducing a powerful weapon in your fight against bugs. ortho home defense max. with a new continuous spray wand. and a fast acting formula. so you can kill bugs inside, and keep bugs out. guaranteed. ortho home defense max.

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stocks stocks that have run up too much courtesy of market mechanics. rather than anything it relates directly to the company you think you own. in recent years we've witnessed the rise of a ton of factors that can cause a stock's performance to differ even more radically from the performance of the underlying company. at least in the very short term. over the longer term, of course, they tend to converge, right, but over days, weeks, these days even months you have all sorts of things that can make the stock of an improving company fall or the stock of a deteriorating company rise. these days many investors use exchange traded funds. they're really pervasive. etfs. they use them to get exposure to sectors. they buy or sell with a ton of leverage giving them double or triple the buying or selling bang for one buck. the proliferation of ets means stocks in the same sector can

trade in lock step with each other. the good companies moving in tandem with mediocre ones. it's one soup to nuts buffet. nothing's different. now a business sector has always been an important determinant of a stock's performance. if a stock is a house, say, right, then its sector is the neighborhood and nobody wants a good house in a lousy neighborhood. but these days the influence of these etfs have made the sector more important when it comes to the day-to-day action of a stock. so your -- >> house of pleasure. >> -- could be right in the neighborhood with -- >> the house of pain. >> plus you have the high frequency traders. it causes a massive across the board move that makes no sense from the perspective of fundamentals of individual companies. especially in extreme moments of volatility. do you think any good stock held up in a flash crash. these new waves all distort the stock picking beach. i think another one can happen.

of course, when times get tough for companies they can get much tougher for their stocks. i spent a lot of time talking about the problem of forced selling on the show. stocks can get slammed just because financial institutions like hedge funds that own them are in trouble. maybe they need to sell everything in order to raise cash, not because their companies aren't any good. you see this happen every time a bunch of hedge funds makes the same bet and a bet doesn't go their way. many money managers rely on europe and loss when the eurozone dominated the headlines. they didn't have to sell the european assets, they even sold gold. especially if the investors were clamoring to get their money back. this is what happened when we crashed in 2007 and 2008. that took most stocks down to absurdly low numbers. look at the prices. a lot of the great stocks hit 52 week lows that were much lower than you would expect. nothing was wrong with the companies. you have to take into account

the influence of short shellers. when lots of shorts pile into a stock and get hit with an unexpected piece of good news from the company, you can get what's known as a short squeeze. since short sellers have to buy north to admit defeat and close out the positions. they tend to do it all at once. that's what happened when net flieks soared at over 300 in 2007. there weren't enough shares to go around for the short sellers to buy and cover the thing. remember, the market is a market in the end, right? it's a market. it's dominated by supply and demand like all markets. when there's not enough supply of a given stock or a kind of stock to satisfy that demand, you're going to see stocks rise based on the fundamentals of the companies. when there's too much supply of stock then the shares get hammered well beyond where you thought they could go. we saw this a lot with super hot areas like the chinese internet ipos in 2010 and 2011. at first the returns from these deals, they were staggering. the gains became smaller and smaller as you got more and more

chinese dotcoms coming public. the same thing happened at the end of our own dotcom book more than a decade ago. the supply was way too heavy. demand well oversaturated so the bottom line, recognize that what's happening with your stocks doesn't always necessarily reflect what's going on with the underlying business and use that fact to your advantage. when a company that's in terrific shape sees its stock smash for reasons unrelated to the fundamentals of the business, that's going to be an amazing buying opportunity. just remember that it can take sometimes a very long time for the action in a stock to sync up with the performance of a company it represents a tiny piece of. that way you won't be frustrated with what you thought should happen immediately after you heard fabulous news. instead you can wait until the market gets smart and reward your stock with the move it deserves. dave in wisconsin. dave. >> boo-yah, jim.

greetings from wisconsin. home of the green bay packers, baby. >> who cannot like that team? what's going on? >> not much. jim, i wanted to ask you, during times of high probability like to apply a dollar cost averaging strategy. i was wondering if you could share with some of us home game mers tips and tricks. >> that's not my strategy, just so you know, dave. people have to find a strategy what they're comfortable with. i like a pyramid strategy. i lie more and hope the market takes it down and buy more lower and lower and i buy it in larger fashion on the way down. it's called scale buying. i talk about that in the book "real money." dollar cost averaging doesn't do anything for me. that way what i do for action orders plus.com. i get a better basis as the market goes down. it may seem silly, the stock and the company, this era he not the same thing. have you to keep them separate in your mind. what's happening to your stock, good or bad, does not mean the company has the same fate. it often takes time to sync up

with reality. make sure you're patient in order to get rewarded by the bho moves that you should have gotten to begin with. stick with cramer.

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. welcome back to . welcome back to tonight's getting back to even edition of ""mad money."" i'm giving you a look at insights from your personal economic recovery plan amidst all of this volatility. i talked about the need for investors to become a little bit more like traders. not a sin. the need to watch for term moves and stock prices and take advantage of them rather than pretending like so many pundants do that short-term gyrations in stock prices are beneath their noses and their notice and will somehow pollute your gains. >> boo. >> so how do we square the idea that when you buy a stock its price can become unglued from the underlying fundamentals of the company, the facts about the business? with my insistance that you always do your homework and keep track of the fundamentals by reading quarterly conference call transcripts and quarterly filings to keep current with the company. stock prices will bounce around anyway. if they're at the mercy of macro

economic factors, big picture economic stuff that companies can't control, sound familiar, what do you do? waste of time? how about if their stock funds are held hostage by hedge funds? learn as much about you can by the underlying company can be neutralized. why because homework is the most onerous, why do it at all? the fundamentals still matter a whole lot. and more importantly, they are knowable. the reason we focus on the fundamentals on this show is because anyone who tries to understand them can do it and the information is all public and readily available. in short, while you may think the homework is tedious and boring, it's also much better than trying to compare -- to predict whatever is out there, right? that is totally unknowable. investors are always looking for an edge, a leg up that provides them with an advantage over anybody else. that's never going to change. not all advantages are the same scale, but just by following my

standard homework reggie men, you should have the same practice. your homework involves looking at publicly available information. according to some economists, the very fact that the information is out there means it should already be baked into the stock, meaning the share price fully reflects what you know from your research, but we know that's just not how the market really works. that's just on paper. lots of people are lazy. lots of money managers or technicians mean they look at the charts, dismiss the fundies or the kwaunts who won't get down into the nitty-gritty of a quarterly conference call. if you keep up with this information, you will know more about a stock than many of the professionals do. i was a professional, i still am, and if that's not an edge, i don't know what is. homework is taking control of your financial destiny. that's why i focus on it. i know it will get some results. not just any results, but very factual, objective kind that gives me comfort when stock goes down. maybe the homework won't give you enough information, maybe it won't even protect you from the

whims of the children in washington, d.c., who play with the economy willy-nilly, or the debt issues that affect any rogue nations in europe, but learning about the debt isn't an all or nothing proposition. it shouldn't be dismissed just because it doesn't immediately translate into a quick profit. remember, ultimately stocks do tend to drift back into line with where they deserve to trade given how the underlying companies are doing. so in addition to knowing a lot of pertinent things about a business, you can also assume that your stock will probably end up with a certain price range if you wait long enough. on top of that, as long as you keep up with the homework, get a good, clean way of deciding whether or not to cut your losses of a stock that's not working. if it's not working, that's an incredibly valuable tool. you can sell. especially when you're trying to claw your way back to even. on the other hand, it will give you a conviction to stay in a stock that's been hammered for the wrong reasons. that's the favorite reason to do homework. either way, you know why you're buying or selling something.

you won't be beholden to anyone but yourself. you can use the big down drafts you get as a way to be able to buy high quality stocks because you know they're high quality, you've done the homework. the better you can do to watch the stocks, the better position you are to take more calculated intelligent risks. be more aggressive in order to rebuild your capital swiftly. they are of paramount importance when it comes to dealing with the central dilemma of getting back to even by investing in stocks. the tension between needing to protect your already diminished capital, and i respect that, and needing to risk that capital in order to make more money. but even though these skills are handy, they aren't what most people would call interesting. they may not give you the total picture you need to get where you want to go. as for the boredom factor, let me take care of that. i spent years trying to make this game interesting and i think i've shown i will do anything to keep investors engaged, especially in this show. i've come out wearing a haz mat

suit to compare has, hasbro, from mattel. i've driven on a lawnmower to treat you to looking at john deere. i can't tell you how many dollars worth of expensive gizmos i've wrecked. so i'm not concerned that too many of you will skip the homework. believe me, i will make this stuff entertaining for you. we have ways of making you motivated. the bottom line is that it's important for you to know why you're doing all of this work, what the point is. it's a way for you to build conviction in your stocks when the market goes down. it's a way to get an edge, one that's totally legal. even the most volatile or more calm of all stock markets. jason in new york, jason, please. >> hey, jim, given you a west i7bdian boo-yah. >> i'll take that in a heartbeat. >> my question was about stocks. what is the criteria you use

when choosing secular stocks to either invest or trade in. >> very little research on the stock. i might be able to do my own work and be surprised as other firms pick it up, pick it up for research. >> i don't expects it to go to zero. reconfessions of a street act. i talk about bad speculating. i do in real money. i like a company that frankly has the sky's the limit market opportunities. if they have a product that everybody might want to use and no one's using if yet, i may have the home run. let's go to nick in california. >> hey, boo-yah, jim. >> boo-yah, nick. >> hey, question for you. stock like apple, it seems counter intuitive to judge its pe when it has so much cash t. seems they would have a better pe if they gave their mona way. do you have any way to advise investors how to look at that or how should they take a look at that? >> my good friends who own apple, when i ask them they often back out the cash.

they just say, listen, the cash is a neutral, forget that. if it didn't have the cash, this is what it would be selling for. that's the way they come up with the price turns mobile. i like the cash. i like to use the normal numbers. i like the big earnings models that i create myself. i've always had higher earnings estimates for apple and then i divide out, look at the multiple and then i say is that stock cheap. it's cheaper than the average stock has been for years. who home hum homework. the homework is the way to get it. stay with me.

in the face of rushing declines and uproar yous rallies alike i'm opening up the "mad money" toolbox to teach you how to become a better investor even in this whacky times when companies are full of tens of billions of dollars go begging. i want to tell you about a tool that can help you make money pretty quickly but also carries a certain amount of risk and can be trouble if you don't know how you're doing it. very topical. investing in ipos. it's impossible to ignore the

ipo opportunities that have presented themselves in the last couple of years, including many that have gone to a premium and are red hot from the moment they're born. these are led by technology and social media names which have been met with exceptional hype. hype doesn't explain the buzz. almost hysteria around the facebook ipo. that was super hype or hyper hype. where did it get us? aside from being one of the biggest debacles in market history, ultimately this didn't translate into anything more than a fleeting opening pop of $42 and a sickening decline to well under its initial $38 pricing. sure, ipos are sexy. they're talked about and written about endlessly. you're hardly ever told what to actually do with them. that's one of the things i wrote about in getting back to even. this has been a big theme for me because i used to game and play. it's one of these, believe me. and mostly importantly, this was something that i did very, very

well at my old hedge fund, even -- and i'm going to teach you the basics right now because when you know how to tell the difference between an about to be public company that will soar and one that will go down in flames, you have the potential to rake in some serious profit. the lure of ipos is that when you nail it, when you get it on the right one, when you're in there, you can get gabs of 20, 30, even 100% in minutes. that makes them incredibly attractive. they can get in the way of your better judgment and cause you to invest in initial public offerings that end up stipging up the room. as helpful as the profits can be, don't let the brokers trick you into buying every ipo and that's tai great way to make money. make sure your broker can if a nagle you some shares. some initial public offerings aren't worth investing in at all. they always try to slip in some klunkers. after they've lulled you into thinking all the deals work, that's when you really get

hammered. partially because of the performance of newly public stocks tends to be all over the map and partially because there isn't that much available information about newly public stocks beyond the prospectus, there's a tendency to assume that the success or failure of a given ipo is the factor of luck. wrong. i think you can figure out which ipos are uninvestable and which ones are bad. it's about analysis. it's the kind of homework that professional money managers do. it's the kind of homework i advocate endlessly on the show. i know the pros have it right. i would analyze them the same way back at my old hedge fund. i made a boat load of money by investing in ipos. i want you to know how i did it using the method i lay out in "getting back to even." i think the investment banks that underwrite all the deals have their own agenda. one that is often as much about

bringing people, regular investors, back into the game as it is about helping their clients raise money on the equity side. in other words, you're trying to help the buyers and the sellers. one of the things i learned in my many years on wall street both hawking stocks and bonds and managing money for myself and for rich people in my hedge fund is that when the market turned south, when it becomes difficult to make money, people are starting to leave the market entirely and giving up on stocks, i think the brokers like to throw investors some easy wins. lay-up ipos so they'll pop when the stairs start trading. why do i think they would underprice the deal and short change their investment bankers? it's just as important that their other clients, the ones that pay them interest when they buy them, will be there. they're a great reason to feel good about owning, trading, investing in stocks. when times are tough, the brokers want to entice you back into the stock market casino. look at the ipo of linked-in.

that price back in 2011 jumped over 100% in its first day of trading. this offering signalled talks about a bubble on internet stocks. the issue was artificial the way it was priced putting out very little stock, knowing it would create a pop and creating a bubble. the brokers knew it would be hot in part because of the names like a facebook and groupon. they offered a limited number of shares and set the price below the hyped levels, demand would be huge even though linked-in is a well known company, the brokers tightly controlled the supply. parcelled it out to accounts that we would not flip the stock and gave out just enough to the large mutual funds that they'd be able to start but not finish their positions. that's really important because that way the mutual funds appetites whetted can come into the regular stock market and bid linked-in up to get the rest of their position in. they take advantage of the sliver. they get some on the deal and

then they average up in the aftermarket and they have a pretty darn good basis, better you can. never forget the trick to a successful ipo is the rationing process. the syndicated desk knows how much the big mutual funds ultimately need to be able to have in order to be able to affect their performance. in other words, if you're running at a billion dollars, you can't get linked-in. they give them a percentage. 1/3 to 1/2 of what they need. that forces the client's hands to complete the position. the clients could flip the positions themselves but the brokers have ways to monitor who takes that quick money and they will not be allowed to get big aloe kagtss the next time around. there is a penalty. you benefit because the syndicate desk almost always save a lot of stock for retail investors as they know that you're more likely to hold on to stock and not play the flipper game. these are full service brokers, not necessarily the discount guys. i am indifferent to whether you own the stock, trade the stock, sell the stock.

i just want you to make money. but the one thing i don't think you should ever do is go into the after market and buy stock particularly with market orders, meaning buying the new ipo in the open market after it started trading which is often at inflated valuation levels. if you don't get in on the deal, at that i can a pass. forget about it. i've got staggering statistics that show you're almost always a sure loser if you buy a hot stock after trades. most just gigantic losers that could destroy your nest eggs. we play the odds on "mad money" and if the odds favor you won't make money, i won't make an exception. you are in a much better position than a mutual fund. you don't need to buy a lot in order to be assured that you have enough shares. you can pick and choose provided you do enough business with that full service broker. bottom line, ipos can be a great way to make "mad money." keep these ipo mechanics in mind and remember that the big guys do not necessarily have you a home gamer in mind as i do.

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thin coffee shops. people who i thave been out of work. you can tell it wears on them. narrator: he's fought to pull us out of economic crisis for three years. and he still is. president obama's plan keeps taxes down for the middle class, invests in education and asks the wealthy to pay their fair share. mitt romney and his billionaire allies can spend milions to distort the president's words. but they're not interested in rebuilding the middle class. he is. i'm barack obama and i we're back and we're talking about the incompetent vesting tools and opportunities you need to take advantage of in order to rebuild a battered portfolio or

maybe grow an already healthy one. we just went through some of the basics of how an ipo works and now it's time to teach you the process of separating the worth while ones from the duds. something i explain at length in "getting back even" your personal economic recovery plan. dealing with ipos can be difficult and dangerous because of the prospects of instant gains is so enticing that the euphoria can cloud your better judgment. that's why you need a consistent method to make sure you don't get torn to pieces by something that you don't understand. a deal that you can't fathom or make heads or tails of. here's your primmer on analyzing hot from cold and safer from more dangerous. now the first and most important thing i look for with an ipo isn't what the company does. no, it's the company's pedigree. what do i mean by that? i care about who the executives are, who the investors are, more important, who the brokers doing the deal are. the first cohort, the managers, can often be a relative unknown and strangely is the least

important part of the whole pedigree equation. some of the best deals represent technology companies including social media companies. those companies revolve around an invention much more than a management team. if you looked at google's management, you probably would have avoided its ipo. who the heck were larry paige and sergei. those relative new kids on the block have proven themselves and the bet on some of the new young innovators is that they will too. my second check, who are the investors? it's more more of a negative check. a disqualifier. looking at the investors, i am concerned about you getting caught up in another kind of investment, one that is funded by private equity companies anxious to cash in and get out in a better market. think about private he can at this time which firms like blackstone, kkr, carlisle, they

brought dozens of companies in the past few years. in many cases paying far too much for them at the market top. now they need badly to offload some of these companies into the open market so they can get them off the books. some of them will be barely profitable. others will simply be stinkers that the brokers will try to entice you to pick up with the hope that a rising tide could lift all boats. the private equity ipos almost as a rule cannot be trusted. and this brings up another important aspect of analyzing ipos. recognize that just because a company can be publically traded doesn't mean it's junction, the point is it would qualify as a mockery of a sham. what i call stocks that shouldn't be shocks in the book, "getting back to you." some of them fit into this category. the regulators don't have a mandate to judge the quality of the ipo. they can make the companies disclose as many facts and

financials and they let you judge for yourself. a disinfectant they say. the brokers are deeply conflicted because they do so much business with those private equity firms they're hard to say no to. the brokerage houses get immense amounts of money when they take a company private and even more fees when the company is spun off as a public entity again. i think that's why the investment bankers will often bend over backwards to help them rather than the brokerage clients, you, who are buying them. as with the awful rail america deal from an outfet called fortress. if you want to see the private equity firms are the main investment companies, they have a big red flag there. i explained in "getting back to even" i look at the brokerage houses, a goldman sachs, morgan stanley or credit suisse. why does that matter. am i some type of a snob? they have some reputation, a

caveat, on the line. that makes them less void to bring a company there for the fees. once you've cleared that hurdle, you can take the brokerage name that's underwriting the deal as a fairly good seal of approval for the enterprise. why do i think this? i'll tell you a story. in the '80s, broker, goldman sachs, right, i personally helped work with the finances of a people behind a dazzling young company started by some brilliant people out of m.i.t. totally intimidating minds. it was called thinking machines. this company's claim to fame was it had the fastest computer in the land, in the world. one capable of calculating more data faster than any other computer. i had done so much work with the principles that when they decided to bring the company public i was able to convince them to use goldman sachs as their deal manager. there was only one problem, i couldn't convince goldman sachs to put their name on the deal despite the immense fees that an ipo brings to a firm. the analysts at the time that would have followed the company,

guy named dan benton. he poured over the financials and the product and he made the judgment that the company while having short-term momentum would not have any staying power. i was aghast. i stood to bring a big six figure ticket. young guy, this is it. simply wouldn't budge reminding me that this was goldman sachs, not some slough firm that would put its name on any company that was hot. goldman passed. within a couple of years the company failed, a victim of better technology. take it from me, that's why the brokerage pedigree matters. i would pass on deals done by firms that you've never heard of or have little or no track record. doesn't mean every ipo brute by a high quality firm like goldman will be a success, far from it, but it does help you weed out many failures. here's the bottom line. only after i've gone through that three step vetting process which you can learn more about in "getting back to even" would i consider what they do, what it

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all right. let's get to some mad mail here. this one is from vance. cramer, we are faithful watchers of the show and it has helped us tremendously in our investments. thank you very much. some time ago you did a segment on when to buy and when to sell.

i think you laid down some guidelines for percentage increase to take profits and percentage decrease to purchase. could you review these again? vance, these are called scales. i like to be very careful about this because on the way up i like to take a little off after 25% take a little more off after another 25%. ultimately my goal is to make sure you play with the house's money. that's what i want to do. so you can judge accordingly when you keep taking stock off. by the way, if the stock keeps coming back down, you can rebuild the position. on the way down i like to scale it down. $20 stock, first purchase 20, a little bigger, 17, 18. third, maybe 15 even bigger than that. build on a pyramid. i go over a lot of this in "real money" which is my book that was used as a handbook if you joined my hedge fund. here's one from steve in michigan. hi, jim, i've been reading "getting back to even." i'm interested in using deep in the money covered calls.

i have reread these chapters and there's something that's not clear to me. maybe it's a stupid question but here it goes. why is it necessary to have two separate accounts? i don't use covered calls. want to be precise about that. covered call to me, that caps your top. i never want to cap my up side. i always want to cap my down side. never cap my up side which is why i use this strategy because you know if you're buying a stock like google, you're stopped out at the level of the bottom stripe that you own. you buy the 450 strike, you're not going to lose more after it goes under 450. that's what matters. now why two accounts? this is very important. when i worked at goldman sachs where i was a broker and trader, what i liked to do is put my buy in what's known as the long account. at that point it was type 6. and my sell in the type 7, the short, because what i liked to do is have short stock or ammo against a long. and they have to be in separate categories because i don't want them to net out when the option expires. in other words, you're

automatically netted out unless you put it in two different accounts. i like to continue to roll out my position. that's why it's a very technical term but it's important that you know that you don't flatten the trade, and that's what would happen is you'd flatten the trade if you don't use separate accounts. stay with cramer. with the spark cash card from capital one, olaf's pizza palace gets the most rewards of any small business credit card!

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