Kit, My feeling is that an up momentum day in a stock is just as likely to last one day as it is to keep going up. If you wait, you are likely to miss big gap downs and then, if you think like me, you are less willing to jump in at all. I'd rather be early and not miss the gaps down than be late and try to figure out if this is the start of a down move or a fakeout. I hate the ones I miss much more than the ones I get into too early or even at the wrong time, because the payoffs are so much greater than the risk. This happened to me recently on Dell and MU. I didn't buy puts when they hit new highs, though I did have some in place from earlier incarnations and I made some pretty good money. But, when Dell was at $104 on the pre-split price, I didn't care nearly as much about the puts I had that were under water. When the stock hit $35 on the new stock, I was kicking myself in the fanny for the ones I didn't buy. I can stand one pain much better than the other. <g>
The simple fact for me is that I go on valuations and I like to buy on days the stocks hit new highs. If they hit new highs later on, so be it. That is why I use the thirds technique. But if they crash immediately, using the zero technique, I am not in the game.
I also think part of it is my contrarian nature. I love to buy puts while others are buying a turkey and I hate to buy puts when the herd is selling.
MB |
