ST trading:
I agree that most money can be made with at the money short term options bought at the bottom of the range. My experience of 1995-1997 has made me a cautious person. I lost my shirt trading options. Now I am using options as a proxy for the stock. I will only buy options when I am willing to buy the stock.
Sunw: I don't plan to hold the stock for a long time and I feel that over the long term this company has a questionable future and lots of competition, for the short term good profit can be made. I am buying Jan 2002 options not to miss a big rally. Since, sunw is close to bottom, I think it can be played to make profit for another 50-60% rise in stock price. Once it reaches 15-16 area I would not play this anymore. Also it is less volatile and option premium is much cheaper.
Amat: It belongs to some of my favorite stocks. High beta, high options premium, and lots of upside potential over the long run (???). I also like mxim,lltc,nvls,altr,xlnx. These stocks have high beta and options premium. When I am ready to hold stocks for the long term, I will start writing covered calls to get extra money. But I feel, at the bottom or close to bottom is not the time to write covered calls.
With this in mind, I am not comfortable buying short term options in these stocks because I could easily lose all of my money ( I would rather write covered calls to generate money). I feel reasonably comfortable to buy longer term options in a high beta stock because at least the time is on my side. (Remember, I would like to keep my losses to a minimum). If I buy leaps when stock drops 10-15% and then buy stocks after another drop of 15-20 percent, my chances of coming out ahead are much better. I don't mind holding leaps or stocks for a few months under todays environment.
I would not buy short term options in these stocks. That will keep my blood pressure very high, and severely negate the benefits of yoga and meditation. Of course, I will lose money.
I hope my ramblings make some sense.
Motto: miminize losses and maximize gains
kdavy |
