Call Options:
Robin, As always, after all the analysis in the world, nothing is sure in life except "TAXES and Death." With that in mind, to be long on any option you first must understand the movement of the underlining stock.
1. What's the daily vol.
2. What's the daily swing.
3. Any buyers? Open interest?
4. What option exchange trade this option. Look for CBO & AMX., vol.?
5. Are the pros in the stock long or short. (Barron's)
6. Any new news to change the picture.
7. Any new products.
8. Check insiders movements.
Alot to think about? You bet...Now to answer your question, I would purchase long calls only 5 points into the money on any stock with a minimum or 3 months out or greater. The stock MUST have daily volumn of no less than 1 million shares traded and have a daily swing of 8-10%. Yes, there is a large price to the premium, but your RISK is reduced!
This will answer Rich's question too. Remember all the brokers are interested in is commissions!!!! So, if you buy close in time to expiration, chances are you will be out within a few days. Then he (the broker) will try to get you back into the game. Then guess what, out again. Two round trips minimum makes you about $300.00 poorer.
For those of you new to options, it's not for everyone! You can loose 100% of your investment! To learn more about trading options, order the CBO's book "Options, Essential Concepts and Trading Stradtegies" edited by "The Options Institute". This book is the best on the street.
Morry
compuk12@tpi.net
PS the pros spread 99.9% of the time, low risk...Remember they are net SELLERS!!!! |
