Hi Fred. When I starting out with options, I think everyone will tell
you to only use money you can afford to lose. I don't think the number
of contracts is as important as the amount you spend on a trade. For
instance, if you buy $500 worth of options, consider how much they need
to increase in value just to break even. With my broker---Fleet---it
would take about 16% just to cover costs in and out. It seems more dangerous
(in my eyes) to invest this small of amount, because you need to hold the
position for a bigger gain, than to go with a figure closer to $1000.
I'm sure someone else will have a different perspective, but that's mine.
As for strategy, I'm always researching and learning how to improve my stratefy.
You will notice on this thread that over the last week, I've been discussing
a new theory I call RSI95, that I've been developing. I'm fortunate becasue
when I have a new idea, I have the best research in the world to test the idea
on...the Bloomberg. Without such a computer, my new theories would take much
longer to develop and test.
You also mentioned in, or out-of-the money. I used to go out several
contracts, because I thought there was extra volatilty to gain from. Bad idea.
If the investment goes the wrong way, you lose your money fast. Now I
prefer going at the money. My stomach feels much better now.
Hope I helped some. |
