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Weekly Option Plays
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Below are the weekly option plays constructed from the weekly range bound stocks.
A reminder to all subscribers before purchasing any stocks or options. We use technical analysis only when selecting range bound stocks. You should:
- Use the Buy Price as a Buy Limit order only. Do not use a market order or a Buy Stop order.
- Immediately place a STOP LOSS using a minimum of 20%. The 20% stop loss of options is comparable to the 3% stop loss used on stocks. This percentage is the amount you are willing to lose.
- Check the stock periodically during the day and move the Stop or STOP LOSS order up or down as needed. If you cannot check during the day, then check the price each night when you get home from work.
- Confirm there is not any negative news each day, which is affecting your selection or the industry of the stock you have selected. Money Central - In Play is a good source of information and it is free, find one source you like and check it often. If there is negative news, then exit the trade. Why watch you profit erode or even worse your loss increase if you believe the negative news will impact the price of the stock?
- If your broker allows conditional trades then along with your STOP LOSS place a SELL LIMIT using the "Target" price. If your broker allows issue a TRAILING STOP LOSS of 3% of the stock price or 20% of the option price.
Research published 1-4-2004 at 12:02 a.m. central standard time.
January 9, 2004
Volume 13, Issue 2
Liquidity continues to be a problem in the markets. There are many people and lots of money on the sidelines!
Do not chase prices; we will have our day with option plays.
Click on the links below to view the details of this week’s option plays
- Speculation with Calls and Puts – I do not see any options with attractive buy prices for either Puts or Calls for this week.
- Price Straddles - The premiums are too high for the stocks identified this week making the spreads to large and much too expensive. No price straddles selections this week.
- Vertical Spreads – The premiums are too high for the stocks identified this week making the spreads to large and much too expensive. No price spread selections this week.
I am leaving the link to the OEX spread active. The spreadsheet makes a good training aid for those of you not familar with credit spreads.
Click here to view the spread progress.
Want to learn how to avoid common mistakes made by investors – click here.
Whentobuy.com and this newsletter are provided for educational purposes only. No statement in the documents should be construed as a recommendation to buy or sell a security or to provide investment advice. It is possible at this or some subsequent time, the editors or staff of whentobuy.com may own, buy or sell securities discussed. All investors should consult a qualified professional before trading in any security. Before trading stocks or options you should understand the risks. In addition, anytime a stock or option is purchased or sold, transaction costs including brokerage fees are at risk. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness.
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