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Brent,
IMO options are best utilised in trading long term directional views. The
most important things to remeber are:
where you think the market is going to be close to the given expiry (don't
let the option expire, too much risk on the close out)
Examine the smile or volatility skew for the market you want to trade, buy
the options that are cheap, but will become valuable in time (eg. out of
the money calls are cheap puts are expensive, buy the OTM call you are
bullish the market goes through the strike. You are now long of an in the
money call, this is equal to a put. Sell the expensive put and you are
winning) OK before i get flamed, it's not that easy, but thst is the
principle.
Focus on controlling your risks (always good advice).
Options allow you to hold a long term position and sleep at night (only if
you aren't short of them). Good for long term trading.
Hope this helps
Zaheer
PS. Today I am going away for 3 weeks to an island in the sun,
unfortunately i will only respond to new mail after 1 May.
happy trading
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