Ghost of Cutten
Registered: Aug 2009
06-09-12 05:57 AM
I found with these kinds of stocks, it can take quite a long time for them to blow up, I don't think 3-6 months is enough. For example, I bought puts on some shitty real-estate stocks in 2007 and it took until 2009 for some of them to hit $1 or below. I bought some puts on a China fraud in 2010 and it took a little over a year to blow up.
My advice would be to go out 18-24 months with the LEAPs. Yeah, you only make like 3-5 times your money instead, but at least your chance of making that is about 75%+. Alternatively if you do use short-dated puts, then trade much smaller and expect to have to roll them over for up to 2 years before a payoff.