I notice that when you recommend options to be bought on a stock you usually buy in the money options. Is there a reason for this? I haven't had a lot of luck with options, they usually didn't get up to my price and either ran out or I paid too much and time wore them down. Doesn't the same happen to in the money options? (July 2, 2001)
When you buy out of the money options, you are paying for time value and volatility; there is no intrinsic value, i.e., the part that is in the money. It is all speculative. In the money options have intrinsic (or 'book value') as part of their price. If you buy out of the money and the stock goes nowhere, on expiration your option is worth zero. If you buy in the money and the stock goes nowhere, at expiration your option is worth the in the money portion. That is one reason we like in the money options. There are many more and we discuss them in detail in the Options You Can Use Seminar. Seminars are starting up again on August 1 and we will have a link to sign up available soon.
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