Options

So I have been following options for a long time and even occasionally "practiced" some simple stratagies. But then life gets complicated and I push it to the back burner. I really would like to get more into options since they really open up some very interesting investment strategies which are simply not easily achieved with regular stocks. Besides the fact that they move a lot faster (both to the up and downsides) they provide the ability to more easily capatilize on the movement of stocks in any direction without necesarily needed to know where things are heading. Now wouldn't that be nice ;-)

Given the choppiness of the market these days...I figured I should take another look...as motion is the key to options.

So...yesterday I bought basic PUT positions on Excel Maritime (EXM). The July contracts for $8 puts were selling for $0.60 and the stock was sitting around $9.15. Now the reason I selected a PUT is because EXM has traded in a range of $3 to $10 over the last 8 months (see chart below, FYI I almost loaded up on $5 CALL options down at $3...oy what a missed oppt'y!)...and it has been sitting at the top end of the range for about a month. That tells me that it will either start to retreat or breakout soon to the upside. Since the BDI and the general market seems to be having some issues with breaking out from 8,700/3,500 I was betting that it would retreat again.

So where are we after one day?

Today the stock has fallen to $8.71 (-5%) and the put option is now worth $0.75 (+25%). Now the real question...do I purchase an offsetting CALL option to protect the gains using a staddle? You tell me...

I forgot to push POST yesterday...so I will give you a realtime morning update for the second day...stock is down an additional 11% pushing the overall option to $1.05 (+75% from purchase)!