He's wrong, of course; doubling a measly $10 initial bet with each loss may not seem like much, but by the fifth spin, you're actually putting in $160 and have at that point already lost $150! So I decided not to partake in this scheme -- after all, four or five losses in a row would have completely wiped out my allowable gambling funds. But I did decide to try a similar technique with stocks - in particular, with SIGA.
My most recent accumulation of this volatile biotech stock started at $4 a share, a 33% discount to what it had been trading at just a short month before. With each 20-cent drop thereafter, I pumped more and more cash into its shares -- I mean, just like the roulette ball has to eventually land on Black, so too does SIGA have to eventually go back up, right?
History is on my side as well; at the end of last year, after the stock shot up to over $5, it then slowly started its march downward, before settling in the $2.60-$2.70 range. Then, after one fine December 80%-day, SIGA was right back to where it started the decline, $5. What it needs is a catalyst in the form of a drug-trial update, a government-funding increase, and/or another smallpox vaccine-infected boy. But, with its current ST-246 human-safety trial slated to wrap up in October, investors may have to endure a couple more months of pain. In the meantime, I will continue to accumulate on what now seem like everyday declines. Because when the SIGA ball finally lands on Black, there will be much more than just a 1-to-1 roulette payoff.
Disclosure: Author has a long position in SIGA
SIGA 1-yr chart