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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: Tony B who wrote (1663)	10/29/1999 11:00:00 AM
From: Madpinto	Read Replies (2) \| Respond to of 2241

That's a great question. I have had the most problems with exercises. First, I have forgotten to exercise options that were in the money but not by 3/4 of dollar. Second, I have had options automatically exercised that I wish I had sold instead. Lastly, I have neglected to exercise call options* for a big dividend. (*When the interest on the strike price plus the put is less than the dividend amount.) These mistakes would not have happened if I had paid more attention to the positions. I have learned over the years to take some money off the table as things go in my direction. I have had many profits quickly turn into losses with options.

To: Tony B who wrote (1663)	11/17/1999 12:29:00 PM
From: Carl Fritch	Respond to of 2241

Some things I recommend are: Buy options at least 3 months out. They have less "time decay" in the price. The closer you get to expiration the more like "gambling" it becomes. No matter how good the option play looks, never risk more than a small portion of your available cash on any one play. Have a definite hold time for the option and sell it when you reach that time... Don't hold it too long or wait until it expires hoping you will get your money back if you are in a losing position. The "time decay" increases a lot the last several weeks before the expiration of an option. Its very possible for the stock to move the direction you want and the option to move the other direction. If you buy an option and the stock doesn't go the direction you expect... sell it on the next up trend in the stock. Don't keep holding on hoping it will come back somehow. You need to be very good at Technical Analysis and always remember its like predicting the weather... it only gives you an "edge" its not even close 100% accurate. The farther out you look the less accurate it becomes. If you have the capital to "sell puts" I think it is a better way to go because the risk of loss is no worse than buying the stock. I'm currently trading using the Motley Fool IBD-RS screen and I am not trading options now. I do think that the Motley Fool's stock screens are a great place to start for possible option plays. This particular "stock screen" has had over a 100% return every year for the last 3 years. To me if I can get that kind of return just buying stocks I don't see much need in risking money playing options... I started the screen the end of August and I'm up over 30%. My Friend Mike is having great success "selling puts" if you want to check out what we are doing check out our club: geocities.com