Steve XIV, re. leaps
first: I'm not sure what I can recommend. I "published" my overall-performance hoping to hear who was more or less successful with his strategy. This could be a great help to me when I read about other ways to invest to weight what I read.
I hope I will get sometimes a feedback - but of course, that's everybodies very private decision, if and what he gives free from his very private secrets.
Cause I'm not "scientific" enough to dig deep in theory, all I can say is pure feeling without enough feedback allowing to compare.
Now to your question - with all my bad feelings why I cannot be sure, if and where I make shit or not:
How long?
IMO better too long. I just picked a PFE-call, the price-difference between 99 and 00 was about $3 related to contract-fees of about $20 - thats not much money for a full year more hope. I know - one could argue, I did like hedging, but I pay a lot more for a uncertain hope. But these are different thinks, cause normally I get the up of longer options back when I sell. So it's nearly for free.
What hope for? From now to Jan99 is not that long. If you're sure about a summer-high, you can spare money buying Aug-calls. If not, when shall your selling-point be achieved? Jan,15th? Too hot for me. I like it - as I posted sometimes - to sell long before the leap expires.
In best case we are in long leaps during a rally - nothing is better.
When the greed hits the market, longterm-leaps increase far beyond every reason. Look at Dell-leap-prices last August, and you know what I mean.
What price for?
I disagree with Janko in this point "deep in the money". "Deep in the money" is very expensive - and the same time I would miss the leverage I hope to get playing options. But for me more important is, that I use leaps due to "limit‚ le d‚gas" (don't know how to write it). Paying 30% of the underlying, there's left a lot of risk.
The way I choose "my" call is very simple: I check the contractprice-steps related to the "at"-steps. Example: I like to pay 1 buck for 5, but not 3. So I search the point where - in my very personal opinion - the stuff seems to get "cheap". As everybody can deduct, this leads to options which are just not loved by the market.
Sometimes I sell despite I assume the underlying keeps soaring, only for taking money out of the risk. I substitute expensive leaps by cheaper ones - out of the money. (so I did with Intel before the warning) The "new" investment is "financed" by the up-to-this-day-win, and I have "new" buying-power for other games.
That's a huge response for a short question, sorry.
Let me close with my - related to all I read from you all - most important feeling - maybe also a critical clue:
When you try to calculate like engineers, using mathematics, before you play a tennis-ball, you will get the ball in your eye. (after this you can measure the blue-tone and calculate the speed of the ball)
If someone of you should have a worse performance than me, it's time to use more our natural resources.
I read a lot about "learning". If this means "understanding" in a logical way, I agree. If this means, calculations, rules, fixed strategies - I'm sure that cannot work - or we had no exchange-markets anymore.
Sorry for that "teaching"-taste. You know so much more than me, it's ashaming. But I have this feeling - what can I do?
Jury
PS: Thanks to spellchecking I just learned the writing of "engineers" - understanding, that this is coming from "engine" while the German word "Ingenieur" comes from the Latin "ingenere".
Now I know where the difference between a Camaro and a Porsche is coming from. :) |
