William,
Leaps (Longterm Equity Anticipations)are long-term options with one,two, or three-year expiration cycles. Otherwise, they are the same. You can follow .ltzae or .ltzaf in your watch portfolio and see how it performs with respect to the underlying SEG stock. Your average option-buyer buys near-term out-of-the-money options. That's a call on market direction, quantum of the move, and market timing. Those are heavy odds. For any trending stock that you follow closely, pick a Leap that is modestly or deep in-the-money. Maximize the delta as much as you can for every dollar paid out in premium. The option specialist makes his/her money from the premium - don't compete. Select a time frame which allows for the stock to build momentum in the direction you want and then add a few months to that! This can be anywhere from four to nine months or longer, depending on the stock. Of course, this only works if you follow a stock on a fundamental or technical basis, and you have been able to make a few correct calls given a reasonable span of time. Basically, you try to avoid every mistake that the average option-buyer makes. Their idea of leverage is something for nothing without doing any homework. In general, if you wouldn't want to own the stock, don't buy the options; that is, strictly leverage, not lotto. If you can make a stock work for you, you can make its options work too if you give the options as much lee-way as you give the stock. Simply put, the average option-buyer does not buy stocks and sell them on a fixed day of next month no matter what. If they did, they could easily replicate the losses they run up on their options. Some disconnect there. My .000001, fwiw.
mano |
