Option selection - newbie question =P

Discussion in 'Options' started by weaksauce, Feb 6, 2008.

  1. weaksauce


    Hello everyone,

    I have been in and out of the market for some time. I did my share of reading and research so I do know a little.

    I just have a few questions to the more experience and successful options traders out there.

    When researching a certain option do you base it on the underlying (such as the fundamentals) or just the option itself (such as the technical stuff)? Does it have to do with the type of strategy you are using?

    As far as the technical analysis stuff goes, can you share how you are using the charts/indicators and why?

    Any tips or advice would be great!
  2. Hey.

    I am new to options trading too, but as I see it you can base it on both.

    Obviously if you think the stock will go up or down based on your research, you can buy a call or put.

    Also, there are ways to see if you think an option is under or over-valued by comparing IV with historical Volatility, from what I read.
  3. weaksauce


    Thanks for the reply switze22,

    I know this, but my question is more the details of it. If I think a stock will go up, and I decide to use options to make a profit, what types of research are the experience traders doing to determine they will enter the position? What signs do you look for to avoid the position?

    Obviously just a "feeling" that a stock will go up is not going to work out well in the long run.
  4. Tums


    The keyword is Volatility.

    Get your hands on a few good books on the subject...
    then maybe I can help you more.

    e.g. Natenberg.