Larry, there are 3 conditions to your question.
1. When. This morning, I shorted because you can't buy puts
at the opening, and the stock can move too much in 15 minutes.
2. If I am looking for a move of 1/2 point or less, the odds are
better to go long or short. If I expect a move of a point or more,
I may prefer in-the-money options.
3. The only time I will buy out-of-the-money options is as
protection against a stock postion. For instance, on Monday, if
the stock is at 23, and I EXPECT the stock to crash to 18, I may
short 2000 shares, and buy 20 Dec 25 calls for about 1/2 point.
If I am wrong on the earnings, and the stock gaps up and runs
to the upside, my loss will be limited.
Just my opinion. All trading varies, and my works for me.
Patrick |
