Newbie Q: Best options to buy when I KNOW what is going to happen to the price of the underlying stock?
I have recently begin daytrading options -- but to be on the safe side, I have confined my trades to an online stock-trading competition for now! :-)
Anyway, there have been many times this week when I have been very sure what would happen to the prices of certain stocks, but I didn't know how best to buy the options to take maximum advantage of my prognostications.
For instance, I was pretty sure two days ago, when CIEN was trading near 100, that it would fall to test the 87 area (its 200dma), and that if it broke that, it would fall even farther. (It closed 83 13/16 on Friday.)
So, when it was at 100 and I was pretty sure it would hit 87, which puts should I have bought for maximum payoff? My thought was that buying Feb 90 was probably the best, but would I have been smarter to buy Feb 95? Feb 85? May 95???
Please keep in mind that I am looking to capitalize on very short-term swingtrades in the price of a stock, often buying and selling the options within a day, and generally not wanting to hold more than a few days, maximum.
Any replies will be greatly appreciated!
ig |
