Need some help! I'm having a bit of trouble finding good picks to play. I'm confident in my trading and for the most part, my trades are successful. I guess the problem I'm having is getting the volume of trades up to a level I'm happy with. Do y'all use any screening software (I've looked at OptionMaster) to come up with picks? How do ya do it? Thank you!
Scanning software ocasionally turns up interesting volatility skews, which are fine for one or two strategies. In general, though, stocks which come up on a scanner for interesting options combinations show up for a reason. If a call or put is overly expensive (or cheap), it's probably due to a dividend, news event, earnings, or some other tidbit which you don't know about. That being said, I used to use these guys frequently: http://www.coveredcalls.com But generally got burned whenever a covered call looked too good to be true. Their pay site (with a free trial) is http://www.putsandcalls.com and they have some neat trade finding abilities. I've also tried optionetics, but found the interface extremely cumbersome. Sorting potential trades by probability is a good idea though. In general, follow stocks you understand. If you understand their behavior, it's easy to apply any of a dozen option strategies to them. Even if you play a direction, and pick the direction wrong, simple, low-risk adjustments can still make the trade profitable.
My tool is Investools and I run their screens to find the stocks I need. They have screens for strong and weak stocks. Stocks with strong fundamentals, stocks with strong insider action, etc. This is not a "free" site and I also do not work for "Investools". I am a satisfied user though!!! For some "free" sites, I suggest marketwatch where you can get the stocks which are the gainers, losers, % gainers, % losers which is a good tool to just get a bunch of stocks to more closely look at!!! Obviously, these stocks you get from marketwatch are in play and have huge volumes. And if you know your technical analysis----you can trade most stocks.
I have been playing ITT options for the last couple of months. I have done quit well, until Friday. Just b4 the close on Friday I bot some March 105 calls @ 2.45 thinking the stock would close in the upper 102's. It didn't. So..I now am thinking it may breach the lower end of a large flag pattern that has developed over the last four months. If it does I am cooked. If it opens lower on Monday I will want to either close position or ...... could you possible "articulate' on any low-risk adjustment you might make. (The Option did not trade at the end of the day - it was quoted 2.10 bid 2.30 ask on close.) Swordking: Off the thread but thought this might be good place for this kind of Q
Back on Thread. Here is one I use - Usually gives way too many stocks on any screen - you have to set tight parameters http://moneycentral.msn.com/investor/controls/finderpro.asp
A couple of thoughts: 1) If you're still bullish on the stock, sell the 110 for .85. That cuts your risk by 1/3rd while still allowing you to profit if you're right. 2) If you think it's simply going to oscillate down to the 98 range and come back, sell the Feb 105, and buy it back when the price hits 98. 3) If you think it might break out low, short the stock now--it effectively turns your long call into a long put. 4) If you think it might break out either way, the volatility increase will likely be big, so buy the 100 puts as well and turn it into a strangle. At $2.40 per side, the break even for the strangle is well within the trading range of the stock for the last 2 months, so even if it doesn't break out, you can still profit on oscillations. --- So, #1 reduces risk by 33% but reduces your profit potential. It also significantly reduces theta if you're concerned it will just hover in this range for a long period of time. #2 reduces risk, and allows you to maintain a long term bullish outlook and still profit on a short-term adverse movement. #3 allows you to play it directionally. If you believe it's about to break out, this would have a straight "put" return graph. #4 increases your total exposure ($5), but breakeven seems pretty close, particularly since you're buying March's. And if a breakout occurs, you can profit very well. All 4 have a defined risk. Some increase risk to give greater profits. Some reduce risk to give lessor profits. In the case of the spread, you can make even more money if you're wrong first. (i.e. if it goes down to 98 then comes back, the spread allows you to profit twice). I love options.
I had no idea you would have spent this much time to answer my Q. Thank you. I really do appreciate it! I think I like your # 4 best. It is true, this stock really moves. Both up and down. Last week I bot and sold the Feb 100 calls for a nice profit. So, I will wait to see how it acts on the open on Monday b4 I do anything to offset. My fifth option is to sell and take a small loss and then re-enter with a more agressive Feb play later in the week. I also really love options. I usually buy the nearest ITM put or call for a week or less trade. Thanks again for your insightfull comments.