I am started with option recently. Here are some findings I want to share, and hopeful other people have more.
For quote of option, I use www.cboe.com
and when buy call (or put), i try to find the right bottom point and use a strike price that very close to current stock price, this way, the percentage of increase is greatest. For example, if stock XYZ is 96, then I use strike price 95 which cost, say 1 (plus time premium which can be ignored for now). Then if stock go to 100, option will go to 5 which is 400% return!. While if buy strike price 90, then option will just go from 6 to 10 which is only 67% return.
Also, suppose there is 1 month from now to expiration date of option, then I will try to get in in the middle if there is a small correction or so. This way, the option price will down since underline stock went down, and time premium also less since some time already passed. This way we will have the best of both world.
Also, when a stock break out from a base, instead of buying stock, I will just buy a 1 month or 2 month option since stock will go up a lot in a short period of time after break out.
Still in my early stage of option trading. Will gain more experience later.
DJ |
