USING OPTIONS
This covers the very basics.

What Options to Buy or Sell

Buying:
· Buy at least next expiration at a minimum. For example, if March options
expire on the coming Friday (the third Friday of the month), prefer May
options over April. That is the minimum. July or August would be better as
long as you can get the extra time at a decent price.
· Exceptions
o Pre-split plays
o Extremely expensive options; but has to be good pattern and must see
breakout
· Strike: Just in the money to 1 full strike in the money in most cases.
· Delta: We try to buy a 55ish delta as that gives us good movement for the
price.

Selling Puts:
· Sell shortest times (expirations) you can and still get good premium
· If can’t get good price for the next month out, probably not a good stock to
sell options on.
· Like to sell 2-3 weeks from expiration; will do more, but need good pattern
· Prefer to sell on a breakouts or when strong pattern forming and market is
strong, particularly on the test. On the test you know the breakout has held
and lessens the chance of the stock coming back on you.
· Always consider this play when see strong pattern in strong rally
· Spreads: Prefer $5 spreads between strike prices (e.g., 145 to sell/140 to buy)
as requires less margin
o Want to achieve a credit of $1.50 to $2.00 for a $5 spread.
Selling Calls:
· Want to sell when stock is topping and/or market weakening and has room to
fall before hits support.
· Signs of topping:
o doji’s after run
o close way off high
o volume down on rise
o volume up on fall
o break trend line
o bounces down from resistance
· Sell near term expirations so you can let time work for you
o Bonus: You can sell each month if the pattern holds.