profiting from short term dips in stocks ... using options

Discussion in 'Options' started by SideShowBob, Nov 6, 2005.

  1. I have a dip buying trading system for stocks with a 90% win rate, but the 10% can be really bad losses (40-50%). To minimize the risk of those types of meltdowns I figured buying deep in the money calls would be perfect, as you limit your risk but also gain about the same as you do from stocks with a much smaller investment (and thus a smaller risk).

    However, I found because it's a dip buying system I ended up paying too much for the calls, which usually end up with my breaking even.

    I've been reading the McMillan book on options and so far I've looked at several different strategies for doing this and making money, none of which has worked. Can anyone suggest something that will work in this situation?

  2. birdman


    have you tried at the money options ... if it's gonna pan out ... that's the best bet ... according to the birdman

    keep us posted on your feast / famine results ... you will likely have plenty of both ... but if you can stay in the former camp often enough ... well - time will tell

    Good Trades:)
  3. smallfil


    Sideshow Bob,

    I believe that options in the money or at the money is a better value compared to options out of the money. A lot of newbies end up buying the out of the money options.
    Since, I read George Fontanills, The Options Course----I have bought nothing but, at the money and in the money options. It seems expensive only in dollar amounts. What matters is if your options move to the upside by a large amount to make a nice profit.
    Charts will enable you to time your entry so that, you are able to maximize your potential gain. The good thing is although, your entry might not be 100% accurate as you will see trades where the option has moved and you will be late a lot of times----you can still make money. I know from experience that is possible. A lot of times the option has moved and I bought it because the techical indicators tell me it is headed up.