Option Education

[leemalone2k3]

You're welcome.
Options are a nice vehicle to generate income and protect your equities if used prroperly. Most people trade them directionally (straight calls and puts), which in reality is the highest risk plays out there. What happens is that many lose thier entire investment if the stock turns against them. If you play directional always protect your capital.
Never lose more than 50% on any option play.

I focus on long vetricals and diagonals mainly during volatile markets, usually by legging into the play.If bullish and playing calls, I go long on dips and go short on the next stike up on rallies. As the stock pulls back I cover the short side. This reduces the cost of the long call and allows me to hold my long position. Do this several times and you could end up owning the long side for free or profitable even if the stock slides. You can also be bullish using puts in the same fashion.

I may start looking at buying some leaps on companies that have good fundamentals and have been trashed by the market at some point and selling against them, but I am still bearish medium term.

When the market is stable I'll focus on butterflies and condors.