nws chart..thread, page-29

re: eto on ncp,? ... arthur Hi Arthur ... with ETO's it is best to work from a position of eliminating those Options you don't like ...

With BOUGHT Options we eliminate those in the last 4 weeks as time-decay (theta) is heaviest.

Our strategy is to hold an Option for only SHORT TERM as in a few days to a max of 2-3 weeks if the underlying is still running ...

So if we want to avoid the last 4 weeks and want an Option to run say up to 3 weeks then the ideal Expiry is about 6-8 weeks ... again for a BOUGHT Option.

Now ... since LIQUIDITY is always a problem and given we know that generally the highest liquidity is AT-THE-MONEY ... we should try to choose an Option that will finish or EXIT ... at-the-money .. = highest liquidity when we want to SELL .. and we do this so we don't get caught having to sell into the MM.

Sooo ... if we think that say NCP is say $11.00 and will run up by a $1.00 then we want a CALL OPTION to be at least $1.00 out-of-the-money ($12.00) about 6-8 weeks to EXPIRY ... say January - 29/01/04

This strategy will get you trading and you can use NCP6Q as a paper trade over coming days/weeks to see how it runs ...

Cheers ... tight stops.


This is only my view ... read the red stuff.