Long term Leverage on sector indexs

Discussion in 'Options' started by ramuk, May 10, 2005.

  1. ramuk


    I am a total newbie. At this point, I think that if there were a futures market on the sector indexes I would just use that.

    I am interested in using options for long term (2-6 months) directional strategies. The only thing I want is leverage. (I think I could get this leverage at a prop shop, but let us leave that for now)

    Assuming this is the case, what part of option strategy should I be looking ?

    As an eg. I am bullish on biotech. I am
    looking at IBB (Nasdaq Biotech tracking stock).

    I know that time decay accelerates in the last 2 months of the option's lifetime. So I could choose an expiry of Jan 2006.

    I also know that because it is so far away, the time premium will be high. I also know that volatility somehow effects the time premium. What happens if IV is high when I want to buy the option ?

    As you can see, my knowledge is basically 0. I would appreciate a few pointers in the right direction.

    I need help deciding on the strike price and also what to do if IV is high.
  2. ramuk


    I am just bumping this up.

    Any replies/pointers would be nice.
  3. If you don't know what you're doing with options, why don't you get a book first? That's how most people learn a subject.
  4. ramuk


    Well, I have read (skimmed thru) a few books on options. I have also realized that directional strategies using options is just a very small aspect of options.

    However, the reason I was interested in options in the first place was leverage. So, to keep it simple, I want to only focus on that area.