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Bill, What you say about friction costs is exactly right. I spend a
lot in commissions, get whacked on the spread, and, as I usually do
not buy the current month, I do not have as much leverage. But, since
I am making long term bets and swinging for homeruns, all that stuff
doesn't mean a thing. If you catch a Micron from 95 to 17, or a C-
Cube from 72 to 25,
the
friction is a non event. I like further out in time options because
I don't time things. I just try to get in position for the I
hope is an inevitable major move. As far as strike prices go, it
depends on the stock and the premium. For example, on Netscape, when
the crash came, I was in 170s, 160s and 150s, while the stock was at
200. Anything higher had premiums I just couldn't stomach, and, if
the move happened, I knew it would be 100 points minimum. If it didn't
happen, I wanted to lose less money. Most option books will say to
do the opposite of what I do. They recommend selling options and
using the near term. I have found that a mug's game. good luck, MB |
