Don, the 25 strikes are back in the money as I write this. The dead cat bounce at MU, and for all the techs, for that matter, is probably close to being over.
There is no general rule of thumb. All I can tell you is what I do based upon my system. Remember, I use 90/10 and thirds to enter and exit, so I am taking much less risk than many options players. When I put on a put or a call, I am shooting for a quadruple. However, time can dull that goal. Once the puts enter into less than one month to expiration, if they are out of the money, I let them run and only replace them after expiration. If they are in the money, I often settle for much less than a quadruple. I will roll out in time and sometimes up or down in strike price simply because a few weeks may not give me enough time to see fundamentals take hold.
With my system, you get a large number of total losers. You also get much fewer but still, a painful number of puts that are doubles or even triples, and then fade away to break even or worse before they become quadruples. However, the quadruples and better winners more than make up for them over time. I have found my put and call buying to be extremely streaky. I get years like 1991 and 1996 where I am printing money. I also get years like late 1997, first half 1998 where the quadruples are hard to come by. I realize that not everyone can use this system, but it is the only one that works for me on the long option side. If I take smaller profits, the total losers and the kiss your sister "winners" end up eating my lunch over time.
Hope this helps.
MB |
