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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: JungleInvestor who wrote (41605)4/5/1999 9:00:00 AM
From: otter  Read Replies (3) of 95453
 
With respect, it's my very strong belief that options can and do have a place in any investor's portfolio; but whether or not one should use them depends on that investor's risk tolerance, market conditions, sector strength, the prospects of the company, and of course, the price of the options relative to your convictions.

I've had reasonably good success to date with options having expiration dates well out in the future but they have a number of downsides - but fewer in my opinion than near term options. Key advantage to long term options is that while time value has a cost, you recover a proportional amount of the cost if you don't consume it all and it gives you the ability to recover from short term market blips.

Deep in the money options with extended expirations are in my opinion, safest. They tend to act in many respects like warrants. Option volume seems to me to be a downside only in that low volume = relatively large spread; and for that reason is not, in my opinion, a good vehicle for rapid trading in and out.

re. limit orders. I ALWAYS trade options with a limit set - even if it is at the option price. The reason is that if Sept. xyz 10s are trading at 3 1/2 and those are the calls you want at that price, issuing a market order allows the MM to jump the price on you for that trade. It happened to me once; and it won't happen again. I've also had luck setting a limit price marginally less than the market price. (e.g. xyz 10s at 3 7/16)...
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