MarketFest, Trying to make money with options is notoriously difficult. I only tried it once, and then read up on the subject and decided to forget about it. Options have the advantage of limiting your potential loss to the cost of the option, but the big problem with options (unlike outright ownership of a stock) is that time is against you -- each day you get closer to the expiration date when your option expires worthless. Then there's the premium you have to pay to buy the option. Another problem is that bigger players out there try to manipulate the stock price to ensure that particular options will expire worthless. So there's all kinds of shenanigans going on.
I remember reading an investing book by Andrew Tobias, and he said the only options he would consider are -
1) Warrants (long term options issued by the company itself). With warrants the time/expiration factor is not against you nearly as much, you usually have years until expiration.
2) Writing covered calls on a stock you own, an conservative strategy to enhance your overall yield. With covered calls you really can't lose, the worst case (stock gets called away) and you'll still make money, just not as much as if you had kept the stock.
The older I get, the more I appreciate Warren Buffett's sage advice - he said Rule #1 in investing is to not lose money, and Rule #2 is to not forget Rule #1. If you lose 50% on an investment, you then have to make 100% on the next investment just to break even.
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