I see some references to stock purchases, but most plays discuss options. I do not trade options. What should I use as my entry points for stock purchases on your plays? (June 5, 2000)
We trade options a lot because we can leverage trading capital as options are usually significantly less expensive than share prices. The trade off is that options are wasting assets, losing value with time even if the underlying stock price remains constant.
In any event, you buy an option based on the stock movement-the option's move (other than late in expiration) reflects the stock's movement. We watch for a stock to break resistance or other key level (our buy point), and then we buy the option on that move. If we were just playing stock only, the buy point would be the same-what is good for the option is good for the stock as the option follows the stock. Thus, on any play where we buy call options, it is implicit that the stock would be a buy at that point as well.
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