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Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: venividivici who wrote (134447)	7/15/2006 8:40:51 PM
From: Cisco	Read Replies (1) \| Respond to of 209892

>>January? Any reason in particular for choosing that month?<< Yes for two reasons: insurance and value. When I am going long with OTM calls or puts, I want to be sure that I give myself enough time to be right. I like to have 6 months or more, but at a minium 3 months. From a value stand point they are also cheaper. Currently the mark for a Jan 38 Call is 1.65. Divide it by the 6 months that is left and it comes to .275/month. The mark for a Sept 38 Call is 0.75. Divide it by the 2 months that are left and it comes to .375/month. Therefore the true value of the Jan 38 Call is better even if I close the position within 30 days because I would be paying less per month for the Jan 38 Call. (However, I may consider buying a deep ITM call or put with a short time to expiration because it has little if any time value.) If I go short a call or put, I want just the opposite. I would want an option with less than 6 weeks and preferably less than 4 weeks to expiration. In this case, the effect of time decay would mean I would be receiving far more per month with a one-month option than say a three-month option. **As I have stated previously, I have only limited experience under my belt with trading options. I am sure many here trade with a totally different risk strategy than I do.