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In a message dated 98-01-31 13:40:10 EST, petena9090@xxxxxxxxxxxxxx writes:
<< When my indicators tell me a given commodity or security is shooting up a
bit fast and I buy puts, too often it keeps going north for a while. >>
Hi Peter,
In that situation try this stratagy: First identify the next
resistance level (support if the market is moving down). Devide your capital
into three equal parts. With the first third buy the puts (or calls) at the
market. With the second third place a contingency order to buy the same
dollar amount of puts when the market is half way between current price and
resistance. With the third part place another contingency order to buy at the
resistance level. The result is you will have more contracts at a lower
average price when the market does turn.
Naturally, the market can still go against you so place a stop
at 50% the average purchase price and limit your exposure to 10% of your risk
capital.
Good luck and good trading,
Ray Raffurty
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