Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : The Critical Investing Workshop -- Ignore unavailable to you. Want to Upgrade?

To: uel_Dave who wrote (16896)	4/28/2000 9:11:00 PM
From: RR	Read Replies (1) \| Respond to of 35685

Hi David: Let's take call options. I do ITM only anymore. They don't get their teeth knocked out as much with volatility and downturns. Recovery is better as they tend to move with the stock versus OTM should the stock dive unexpectedly. The climb back on options is tougher on OTM. Exit, GET OUT as soon as a position turns against you. "Get out and get out NOW." Live to trade another day as the saying goes. Rule 1 - Preserve capital. Options are risky as you know. Some of my positions are substantial. I use to put in trailing limit orders at a certain percent below my entry, but found that at times the boys would buy through other orders to reach down and pick mine up, then take it back up again immediately. I won't let them do that anymore. I try to watch the market daily, although I can't watch it all day. Sometimes I can't exit a position quick enough. So, I accept the risk that sometimes I can't get out quick enough when bad news hits. Be that as it may, it is a good practice to set limits, either mental or limit orders, to protect yourself. It is so easy to say "oh, it will come back" and then wait and wait, but if you hold options with this strategy, you can go broke. Time eats away at you quick as you may know. Further, the climb back on options after a stock has taken a hit seems always to be slower and more difficult. So, one has to be careful not to ride a position down thinking, "Oh it will come back." It may not. So, again, you want to get out as soon as a position noticeably turns against you unless you have sufficient time to recover and the stock has a chance to recover (i.e. certain Sept calls on JDSU I'm still holding and never sold in this recent slide, although they were deep ITM). Although I do not subscribe to a certain percent limit order before I sell, I usually start considering it at about 20% loss. Many of the positions I'm in will swing that much in a day and so you have to watch that so as not to allow someone to just close your position out on an intraday swing versus an actual downturn in the stock that makes you question recovery. When sitting on profits....... DON'T GET GREEDY. I have failed on this too many times. Greed sets in and you don't sell because you want it to go up more! Hey, it may not. If you get a double, for example, take half off the table. What's left on the table is free. Don't get greedy. Exit often to take profits. If it is that good of a money making position with options, you can always get back in it. Options swing too much. You will have a re-entry point, so take profits often.... don't get greedy. Hope this helps, David. If I didn't answer a question, let me know and I'll try again. Rick