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Options

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From: "Benjamin"

---Rolling Options---

Well, where do I begin? A thorough discussion of this would take a long time, but here's kind-of a short overview of what I've done in the past and will continue to do so periodically. At the end of last year, I went to :http://www.invest-faq.com/articles/stock-index-djia.html since this is the best place I've found that lists the Dow 30 Industrials and provides hot links to the charts on each (with a nice comparison to how it performs versus the S&P; 500.)

It also has hotlinks to each individual company's web site. From there, I pulled up all 30 Dow charts and printed them. Next, I analyzed each one from their charts alone. This got me excited about Du Pont (DD), Goodyear Tire (GT), Coca-Cola (KO), 3M (MMM), and Sears (S). From there, I cruised over to WWW.CBOE.COM (Chicago Board of Options Exchange) and got the prices of all the available 'calls.' From the list of call options, I looked for some out-of-the-money calls that are out a few months. Here are the ones that looked pretty sweet to me:

DD July 60's going for 3 1/2.

GT April 55's going for 2 5/16.

KO Jan (2000 (LEAP)) 100's going for 1 1/4.

MMM April 85's going for 1.

S April 45's going for 3.

The KO LEAP was mostly for fun (I only paper traded these options, since I'm tied up in Budget Group (BD) stock and First Plus (FP) stock.) Now, I realize I should've dumped these pigs and put my money into the 3M option that had me most excited. Here's what the options prices were on Jan. 6:

DD went from 3 1/2 to 4 3/4!

GT went from 2 5/16 to 3 1/8

KO didn't change (since it was so far out of the money, etc).

MMM went from 1 to 2 3/8!!!!

S went from 3 to 3 ˝

I chose out-of-the-money calls because they're cheap. But, for an almost tick-for-tick increase in the option price as the base stock goes up, I'd recommend spending a little more and going a little ways into-the-money on the option. Also, for those of you out there familiar with this technique, could anybody tell me where to find (for free on the internet) Gamma values and Percent to Double values on options?

Hope that helps a little bit, if it's all Greek to some of you out there, I'd highly recommend reading one or two of Wade Cook's books. (Either Wall Street Money Machine or Stock Market Miracles) Check your local library (I've never paid a dime--except in fines--for these books.) Oh, and I recommend you don't attend his seminar...your $4000 is better invested in the market! Also, you can cruise over to WWW.OIC.COM (the Options Industry Council) and order their free video and pamphlets (sp?).

A LITTLE MORE ABOUT OPTIONS...

From: "Monte" monte@in-tch.com: just a note which may help some subscribers boost their returns!! I note as an example you have XXX on your list for a buy at $17.00, which is great!! Now take a look at the Sept. options. Let's say you bought 100 shares. Wait for the stock to go up some and check the option prices for the next month out. Currently, the Sept.

$20 calls are going for $1.25. If you put in an order to sell 1 contract (100 shares) at the $1.25 you would make $125!! Plus if you get "called out" of the 100 shares you own at $17.00, You would make and extra $.50 per share over the $19.50 sell price you currently have listed. Hope this helps everyone!! Keep in mind that you get to keep the $125 even if you don't get called out of your 100 shares.

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