I have a LONG ONLY entry method based on the daily chart, sometimes weekly charts. Many times such entry is not achieved as price never gets there. However, if I got there, I would be a buyer. No further information is known about the time it would take to get there or what targets would be achieved as I trail stop my entries. With the above presented, what is the best way to play such scenario with options. Thank you much for your time. Joe
Sell 1 or 2 strike OTM puts, then buy the stock at your target price. Sell the puts if they hit ATM, might be sold at a loss.
Hello Forex, That's what I have been doing, but was not sure if I was doing it the best way. Problem Ive been finding is that the premium is very small, so I go deeper expiration to get more from them, is this acceptable ? Not quite sure which expiration to use or if im being too greedy and risky by going real deep. Thank you Joe
I don't think deeper expiration is a good solution, most of the time decay is in the last month. For a premium seller more time is not your friend.
Ok say I got February selling for .30 cents and December selling for 4.00. If 4 drops more than .30 I made more than .30 cents. That's what I meant Probably a dumb thing right? Joe
My guess is that it will take longer than 1 month for the December option to decay by $0.30 plus Bid/Ask spread and commissions. Could even take a couple months, sort of like watching paint dry.
Ok, so sell the nearest month and when it's ready to expire worthless, start with the new month ? Joe