Here's a conservative strategy. Buy the stock now, when it is cheap, and later on, when it seems to be getting near a plateau, consider selling covered call options with an expiration date at least three months in the future and a striking price about 10 percent above the market price of the shares. That protects your profit, but also limits your profit should the shares suddenly take off.
As for buying calls, the premium is usually too high on anything with expiration dates more than a month in advance, so your timing really has to be good to get in and get out on rising momentum. Generally speaking, it's too much of a gamble.
As for selling puts, again with expiration date well in advance, this strategy allows you to take advantage of the premium on options with expiration date far in the future. The problem here is that you have to have money in your account to cover the cost of buying shares if the stock price falls and they "put" the shares to you at a price higher than market.
Of the three strategies, the first, which is conservative, is most likely to generate a little extra profit. Art |
