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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe)
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To: ig who wrote (2033)2/3/2001 11:51:05 AM
From: David Lind  Read Replies (2) of 2241
 
The bet that will yield the most profit if you are right is simply buying a near term ATM put or call, depending of course on whether you are short or long. If you are wrong, you lose only your money invested. Writing naked puts or calls may have appeal on paper, but if you are wrong on your bet you can suffer serious damage. I speak from considerable experience. But given the ridiculous spreads, short term options trading will generally serve to only enrich your broker, not you. Your underlying needs to make a decent nice move in order just to cover your spread and start to pay you for the risk you are taking. Better I have found on a short term basis just to trade the underlying. And if you are not seriously experienced and already SUCCESSFUL as a stock trader, you would do yourself a big favor to stay away from options entirely. Options are a tool ONLY if you have mastered the art of making consistent money with your other trading strategies, and you feel completely confident in your decisions. THey should never be considered a strategy in themselves. There are many, many poor FORMER options traders out there who focused far too much on clever options strategies and forgot that no matter how sophisticated the strategy, it all comes down to being able to depend on your prediction of the underlying. Sorry to sound preachy, but I am trying to save you a lot of aggravation and loss of your capital!

Good luck,
David
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