Secret 23BEAT THE CLOCK
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When you are an option buyer, the passage of time is your
greatest enemy. When you own options, time flies. It always
seems that the stock or futures makes the move you need the day
after the option expires.
In our research, time seems to be the most valuable asset of
an option. Given enough time, most stock or futures will make a
major move, giving you a home run. If you can find a cheap and
undervalued option with a lot of time, you have a great investment.
Cheap, long term options, where the strike price is in
range of the underlying stock or futures price, are true gems in
the rough.
The point to remember here is to buy enough time, for time
flies. Options depreciate as time passes, so, the refrain, buy
enough time!
Also, always set a time limit on how long you will hold an
option. If nothing happens within that time period, exit the position.
With more expensive options and in-the-money options, I
usually set a three week hold period. After three weeks, I am out
of that position.
When you are an option buyer, the passage of time is your
greatest enemy. When you own options, time flies. It always
seems that the stock or futures makes the move you need the day
after the option expires.
In our research, time seems to be the most valuable asset of
an option. Given enough time, most stock or futures will make a
major move, giving you a home run. If you can find a cheap and
undervalued option with a lot of time, you have a great investment.
Cheap, long term options, where the strike price is in
range of the underlying stock or futures price, are true gems in
the rough.
The point to remember here is to buy enough time, for time
flies. Options depreciate as time passes, so, the refrain, buy
enough time!
Also, always set a time limit on how long you will hold an
option. If nothing happens within that time period, exit the position.
With more expensive options and in-the-money options, I
usually set a three week hold period. After three weeks, I am out
of that position.