<<This has been the most vicious market I've seen in many years for the past twoo months. >>
Couple of points..as I said yesterday and as I think you mentioned also....many stocks are WAY down, yet the averages are still up....remember on the way up, when we were at these same numbers in the dow and naz? 90% of the stocks I own or have on watchlists are down considerably from the levels they were at last time we were at these numbers with the averages......
I believe you mainly play with calls, correct? Well, you make alot more when things go up with calls versus stock, but same on way down...lose more with calls then with stock....
Plus, at least with stock, you can hang on as long as you are not margined, but calls, you not only have a time frame you are betting on, but you also have 'time decay'....even if things dont go down, you lose simply by time going by.....so calls are great and provide tremendous leverage and great % gains when things are going well, but you can lose your azz when things are going down if you are not very, very careful....
In this market, if you buy some calls and place a 10% stop loss to limit your losses, imo, you are better off taking 10% of your buy and simply flushing it....In an up market, you can be patient with calls as even a really bad week can be made up if overall tone of market is up...but in this market, and especially with calls, you cannot be patient or you may find yourself with 75%+ losses in a blink. There is so much volatility that a 10% stop loss is more then likely going to be stopped out, unless you happen to time things just right and get in and out at just the right times which is tough to do, especially in a skitso market such as this.....and frankly, the 'cheaper' stocks get, the less appealing calls are.....Sure, as stocks get cheap, so do the calls and they can pop up huge %'s on a decent up move on a 'cheap' stock.....but, with the stock so cheap why be greedy, looking for home run returns, when it is safer to hit singles and doubles with stock versus a home run or striking out with calls.....
MANY advantages to calls over stock, but in this market calls can be very dangerous. On the flip side, nothing wrong with writing CC's on long positions and trade those calls as we go up and down....a tad bit of protection..make a few bucks each month...get to play the volatility a little more safely......anyway, good luck....I would assume today would be a good day to do some selling into this strong green.......BWTFDIKA |
