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[QUOTE]Originally posted by Chart walker: [QB] Good Morning Board :) First, thx [blush] :D As promised below. Working on the first option "set up" also. This first part is done a nice summary of where we are ~ Have a great day all! Chart ~ [FYI -This material I’m writing off line and pasting here at a later date when completed, I will do this as each is completed] In this on going learning process, -which is what this is, we take an idea, then “attack” it and see if it stands, -everyone here helps to sharpen our trading idea’s. The basic’s are PUTS and CALLS, and the SAFEST ones IMO are the ones at what I call “extreme” tops or bottoms (stay away from the middle) –however we have learned Stochastic is our friend yes? J. By that I simply mean that by looking at a WEEKLY chart we can “see” when an indicator get to a certain low/high point that it’s a pivot point historically, we watch all of our indicators and chart formations and buy in accordingly. Because we know we are at an extreme top/bottom if the stock suddenly takes off against us (like the QQQQ’s did when we bought our first PUT at $43) we know this is a “gift” because the indicators were already “hot.” Ok, so we now know how to find the trend by looking at the weekly chart (gallery page at stockcharts.com) and how to find a pivot point so now we know how to find the “safest” plays IMO. Now… --What’s the SMARTEST way to “play the plays?” IMO, “Covered CALLS” along with our Option plays, why? A 3% monthly return is over 40% annually with compounding. (5% and we are around 90%) –for basically free! This on top of our gains off the options. Using charting skills I think we can hammer these IMO [$$$] Quick facts: -Each option contract covers 100 shares of stock, 1000 shares = 10 contracts. -The price paid for the option is the Premium -According to CBOE only 1 in 10 Options are exercised (you have 90% in your favor!) -Calculate the rate of decay of a LEAP by taking the time premium of option price and dividing it by the number of months in the LEAP. -DIA is made up of 30 very large/established companies, each paying a dividend. -QQQQ is made up of the largest 100 non-financial companies on the NASDAQ. -The “return on investment” when buying a 6-9 month option is more then DOUBLE the return on investment that would result if the longest term LEAP were purchased. -Shorter-term options also are more actively traded and have smaller differences between the bid and asked price. -"Gaps" close. Play Gaps with a 3 month option! [As I write this the huge gap that formed overnight is about half closed already, -easy money IMO.] Now some trading “set-ups.” [/QB][/QUOTE]
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