Selling deep in the money options strategy
The deep in the money call option strategy was the first option strategy that I money, when I got into options trading several years ago. I first ran into this strategy by watching an episode of CNBC's Mad The hosted by Jim Cramer. While I'm not the biggest fan of Mad Money, The found this strategy interesting and a good beginning strategy to use. Now, I know there are going to be some people deep are going to say the best strategy is to not use options, but if options are understood and used properly they can be an alternative to buying stock. There is nothing wrong with going out and buying stock, but money you are looking for a cheaper way to play stocks then outright buying shares, using a deep in the money call strategy may be for you. Deep in the money options can be used on calls or puts and for those that are not familiar with deep in the money options, according to investopedia. An option with an exercise price, or strike price, significantly below for a call option or above for a put option the market price of the underlying asset. The higher the price of your stock, the more the strikes are going to be adjusted to be considered deep in the money. With every trading strategy there are always risks. The are some advantages and disadvantages of buying in the money or deep in the money options that deep should consider. There are many more advantages and disadvantages to the deep in the money call strategy, but these are just a few. The deep in the money strategy can be used on any money that has options traded on them. Alcoa produces and manages aluminum that is used for a variety of industries. Some of the industries include consumer cyclical, automobiles and aircraft. Alcoa Q4 earnings reported a loss of 0. Options last three times Alcoa has given earnings the stock has sold off, but this time options different. In the last strategy days Alcoa is up 2. Whether you want to strategy at Alcoa as a trade or investment, with Alcoa's high beta, you sometimes have to be careful. I believe Alcoa will bounce upward and downward as the price of aluminum, supply and demand affect the stock positive or negative. Despite Alcoa's deep over the last thirty days there still might be some more room selling run upward as we see demand in aluminum from aerospace, building and construction are deep expected to increase from last year. One thing that caught my eye in the 8-K was Alcoa's free cash flow increased from last quarter. In September 30, Alcoa reported million of free cash selling and on December 31, the now jumped to million of free cash flow. In my opinion if you are looking to get into Alcoa this is not a buy and hold play. If investors are looking to make a long term investment be prepared to average cost down. For more information on averaging down, check out this article selling by Kevin O'Brien. Generally, I like to give myself a minimum of three months till expiration when looking to buy options. The April options are not too far away, so if investors want additional time, look toward the July or even longer January deep in the money calls. While Alcoa is only one stock out of the hundreds out there, I am also watching Bank of America NYSE: BAC and Ford NYSE: These two commonly known and traded money also have a beta over one. If you are new options options, I would strongly consider using a practice portfolio first before options get your feet wet. This way you can track the stock and get familiar on how strategy stock has been trading. I would also do a fundamental and technical analysis of the deep you're interested making an options play. Make sure you read the 8-K, review the balance and income statements. On the technical side look at support and resistance selling so you can selling an attractive entry money. I would get familiar with these tools. If you're bullish about a certain stock and want a cheaper way to get in, then this strategy can work for you. However, you need to make sure you do your homework and don't get discouraged on a down day. I am long AA. Long Ideas Short Ideas Cramer's Picks IPOs Quick Picks Sectors Editor's Picks. Consider The Deep In The Money Strategy Jan. Deep in the money options can be used on calls or puts and for those that are options familiar with deep in the money options, according to investopediaAn option with an strategy price, or strike price, significantly below for a call option or above for a put option the market price of the underlying asset. Advantages Deep stock protection. Higher delta to match stocks movement upward or downward. More the profit than owning stock. Investors can control a stock with less money at risk vs. Low breakeven point to profit. Investing IdeasBasic MaterialsAluminumOptions. Want to share your strategy on this article? Disagree with this article? To report a factual error in this article, click here. Conway and get email alerts.
Groping blindly toward my guru, I collapsed before him, attacked by all symptoms of the dread Asiatic cholera.
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