Question: “How much money does it take to get started trading options?”
Answer: “Options contract usually cost between $1,000 per contract and $2,000 per contract on the stocks we play, something more and some times less. We do try and play options with as short of a time until expiration as possible.”
We like to pair three types for maximum flexibility and a range in options prices. Fast High Priced Options (150 +), Medium Speed High Price Options (70 to 150) and a Medium Speed / Medium Priced Movers (usually 30 to 70 priced stock) all for the sake of maximizing returns.
The stocks and sectors can be switched on a daily to weekly basis, if we feel the life has been drained out of them on the short and long term. But we will try to stay with the same stocks as much as possible. Stocks chosen for this strategy should have be capable of 5-point moves in one month.
Question: “Grouping of Stocks”
Answer: “Weekly and Monthly Options with the large and well cap names in the industry.”
AAPL – Apple, Inc. – Technology
AMZN – Amazon.com, Inc. - Services
BIDU – Baidu, Inc. - Technology
CAT – Caterpillar, Inc. - Industrial Goods
FFIV – F5 Networks, Inc. - Technology
GOOG – Google, Inc. - Technology
GS – The Goldman Sachs Group, Inc. – Financial
NFLX – Netflix Inc., - Services
PCLN – Priceline.com, Inc. - Services
POT – Potash Corp. of Saskatchewan, Inc. - Basic Material
SPY – SPDR S&P 500 – Financial
V – Visa, Inc. - Services
Question: “What is a Delta?”
Answer: “Option delta is represented as the price change given a 1 point move in the underlying asset and is usually displayed as a decimal value. Delta values range between 0 and 1 for call options and -1 to 0 for put options.”
Options In Play will have a Delta value of .50 or better. At-the-money options generally have deltas around 50. Deep-in-the-money options might have a delta of 80 or higher, while out-of-the-money options have deltas as small as 20 or less. As the stock price moves, delta will change as the option becomes further in- or out-of-the-money.
