habital, last year I had a long position in a stock (2500 shares) that had closed at the days highs, was in a beeyootiful uptrend, and I was looking for a nice gap up to sell into in the morning.
Moody's downgraded em overnight, and news came out (this was during enron mania) that they may have to re-state earnings. Thing gapped down 4 bucks, and kept tanking with no bounces.
After a few blindsides like that I just said screw it, and now I just trade futures (intraday scalping) and options.
Many will tell ya that it is impossible to make money trading options....to this I say, huh?
My little rant about this topic:
siliconinvestor.com
The important thing is to roll over options prior to their becoming front month (unless you're just scalping 1-2 day moves). For longer term trades, I ALWAYS roll over to avoid time decay. I just sold the last of my March's last week before the weekend to avoid time erosion. I will be out of my April's by the end of the 3rd week of March (either out or rolled over to MAY-JUNE).
I also used to buy way out the money's for the big payday, and ended up having most of them expire worthless. Now, if I expect a large move down but don't know when....then I buy 3-6 months out (such as the homies like CTX and LEN)...when you know they'll crack, you just don't know when. Mostly though, I buy near the money or in-the-money....the deeper in the money, the more it is like trading the underlying itself.
Cheers. |
