My Option operations

**shma** Sat Sep 09, 2006 7:47 am

My Option operations
There are a lot of theroies about options. I am not an expertise of it, so I only share my own experience by a few sentences.

1. pick the stocks from blast's portfolio by technique analysis. I believe each stock in blast's portfolio has no fundamental problem, but when it goes up or down varies very much. That is where we guys can apply technique analysis to profit, or, suffer. a stock that can not go down, or has started going up, is the perfect pick in my eye. I can tell two such examples from current holding of blast's model: in the hot list, the stock #5 is the one that can not go down because a big guy is keeping buying it, and the stock #8 has a perfect technique shape.

2. of course only calls are considered.

3. when choosing the options, a stock has numerous strikes at defferent mature time. I prefer long term to middle term strikes. By a middle term, I mean half year to one year, and a long term is one and half or more years. that may to some extend pretect us from wipe out by shorter term going down of the price.

4. the last and most important, the potential profit vs. the loss should be large enough, say, larger than three, even five. there are two reasons: the premium and the price gap. for the long term options, one needs to pay premium for the strike, that is an extra cost a buyer has to pay. since the volume of transaction is very thin, usually one needs to put the buy order at the price of ask. sine the spread between the bid and ask is usually very large, the option needs to go up for quite a while to make the bid reach buying point. So it is important that the option should have huge potential to go up badly.