5 of my Personal Strategies for Buying Options... I've been getting more e-mail on options. Here is a word of caution here.
you can't buy too many calls. Traders have asked me again why I don't buy 100 puts instead of 10.
1) When buying call options only buy 1 or 2 calls for each 100
shares that you would have purchased otherwise. So since I usually buy 1,000 shares of stock, I buy 10 calls. On the Puts of the internet sector I opted for 20 calls.
2) Only buy calls on stocks that you expect will have high
price advances and have had so historically, or are very volatile with huge intraday spread, the profits will be much greater than the price of the premium (i.e. AMZN, AOL, AMGN, YHOO, DELL,CSCO etc)
3)Do NOT rely on momentum alone when buying options. The option strategies mentioned here work best with stocks that are above their 50 day moving average and fundamentally strong, or are beaten down and fundamentally strong. I usually buy options of companies that I have in my long term portfolio which today includes stocks in the telecommunications, satellite, Retail and Drug sectors (I still have MSFT, and INTC long term)
4) Buy options in stocks that you can go on a short vacation and not worry.. This must be now amended because even if you own stocks like MSFT, CSCO, LU, KO and GE, be prepared to either postpone your vacation until things are more stable or watch the tick intraday.. It's worth every minute of it! You'll have an even better vacation later on.
5) Buy options (calls/puts) on these companies: AOL,AMZN,YHOO,XCIT, BBY, CSCO, ASND, COMS, DH, WMT, DELL, GPS, PFE, INTC, MSFT.. These trade in a fast market and there is always enough volume to assure you of a quick exit and entry level. |
