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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: joe smith who wrote (19349)	5/28/1998 4:35:00 PM
From: James F. Hopkins	Read Replies (2) \| Respond to of 94695

Joe; It's like panning for gold, you will have to pan a lot of silt to find a nugget. I'l just use one end ( calls ).. First you find a stock that took a big hit some time back and has not gone up much..or one that you think has a good chance of going up ..( butt to get the edge on the other option holders ) it has to have made a move down since they bought. You chart the ones that have good open interest..not for TA reasons , your just looking at were the vast majority of the options traded at. You may find that while the stock itself maybe had a lot of volume on it's fall, that the option holders who were in the money had no amount of buyers and are holding the bag, with options now out of the money and some of them want out as they want in the money ones so you can pick them up cheap.. Others will just hold on hoping the stock will recover, but any way the volume on the chart tells you that you getting in well under the vast majority of the holders and that there has not been many option trades on that strike price since the stock fell ( stay fairly close to the money but just out of it in most cases ) ---------------- In effect you have the secondary market if that stock moves your way and even if this stocks moves against you you have an edge on getting out with much less loss than the mullets that bought several months ago. Generally I like at least 3 months out on options, OR leaps..it's OK if the leap does not have a lot of time left providing it has a lot of open interest that bought some time back at a much higher price, and has not traded much volume recently at any price close to what I can get it for. Like I say these are not easy to find but they are out there, you are exploiting the pain they feel..they would feel that pain anyway so your not the cause of it. No matter how good an option looks or how tempting it might be if I can't find the pain level I'll pass. It must pass several other test also..but if it don't pass this one I cull it out. In other words you don't want to buy an option that every one else is buying, in the long run that is a sure ticket to the poor house. (1) I have concluded that to be good at options one may as well put his IRA and other stuff in a mutual fund and forget that and focus only on options. (2) Watching a tape from a pro, ( one that made it big then fell to zero then managed to save some money and came back much more careful ) and based on my experience on turning losing habits around I found that to be really good at it you need to be so involved with it that there is little time in your world for anything else. In most cases if options is what you want to do you need to pick one single stock and dam near marry it. The floor traders are generally married to one issue and you are competing against them, you take your eye off the ball and you won't know what's coming next. If your good at it you can win on puts with an up trending stock or calls with a down trender..but believe me it's dam hard and you will not have time to do squat but work that issue..you will take it to bed with you and have dreams of it at night. You will know it's next tick 3 out of 4 times..and if you get tempted to look at other stuff you will close your position first. If you got that kind if dedication and discipline you might can make a few bucks working options on one issue at the time, I've tried all the rest and know that most people who lead you any other way and make it sound simple are no better than a wet noodle. I tried to have a diversified portfolio of options, split with calls on some and puts on others to offset market moves, It don't really work ,,not over time. I did learn something from it ( the calls made out better by far than puts did ) then I started a big hunt to find out why, and while I got my answer it is more than I care to try to explain. ---------------------- If you have the time to pan for a "few" nuggets and stick only to the ones you find that are outstanding "and also pass the pain test you can play a few on the side." Forget all the fancy plays the spread and time premium eats you up most of the time. Over time I've seen a lot of hot shots come and go and then not come back. -------------------------- I hate to be the one who encourage anyone to play options, also I've learned there is not any way you can play another mans hand the way he does, that don't work. I lost enough to really get my attention, before I turned things around and it took a lot of home work. -------------------- Almost all new people who speculate with options lose their rear end, the exception is very rare and you will not likely find him or her on one of these threads. If you find anyone who tells you his lessons were cheap don't pay him much mind. AT least 80% of the people who speculated in options lose money..it's in the charts just down load them at expiration date and look at how few winners there are to the amount off loser's, go beyond just counting the ones that expire in the money..or out of the money go look at what the most of them paid for their fast ticket to riches, and you will do a double take..How could so many lose so much, when almost all you hear about is how much they made..<G> Jim