options are very difficult to trade without basic knowledge and skills. Also they can cause you all of your capital... so perhaps learning first before buying any... Here is my post at STT early this year... it does explain my strategy of buying them but does not explain each and everything related to options... hope it helps and sorry for long post...
As said few times I have different categories of my portfolio based on market cap such as minnow, small, medium and large caps. So I invest in portions... On top of this, there is a portfolio of options plus I quite often start a new portfolio with 3-5k to challenge myself... I need this otherwise I really get bored. This last category is also quite often includes options.
So in options portfolio, I do hold plenty of options. At times, I just throw in few coins in pretty much in any option even when I don't like the heads. For example, last year I bought PGMO around 1c but I did not like the heads much. After months I sold them around 10c... Their are plenty of examples... And plenty of failures, 2-5k losses with each failure. The most recent is TTEO, burnt pretty badly... So extra precaution is required particularly when you want to take a large position.
When I buy the?
Pretty much always. However, the newly listed are the favourite ones...quite often they are being sold for nothing like TOMO... Around 95k were sold at 1c on the very first day and traded at 1.9 the very next day... 90% gain in a day while heads dropped from 22c to 15c and back to 18c..
Other then that, I apply the similar criteria on heads which I apply on almost all trades...
The heads must be in the right sector (still trying to make this a habit).
In shells, management is important particularly with large punts such as VTX and DMY. Management must own heaps of shares otherwise it becomes a lifestyle company nothing more nothing less.
News flow should be imminent... I mean heaps of news flow. Gives the chance to exit as I invest in bulk... May buy and sell in small orders but keeps trying position if the heads keep trading at or below my buying price while the company keeps doing right things.
Enough capital and low burn rate... Only happens when management owns heaps of shares... I observed that they pay attention the way they spend... As it's not only shareholders money it's their too... Enough capital will keep them running the business with less chances of dilution.
People don't buy dogs... However, I really like them. Companies trading at their 52 weeks possibly formed the base with low volume and sideways trend.
Small and tight register with no debt (talking about minnows and small caps). They move quick and returns are handsome as companies go with their market caps not share price...
Project value must be 3-5 times the value of the market cap or stock must be trading at cash back (applies to junior resource stocks)
These are the general criterial which I apply when I trade in speculative stocks... The more criteria set met, the larger the position size is... At this part, options come into play... If any company who meets these criteria do have a listed option, I take large position in options which I end up holding for a while... But at the same time I trade heads aggressively... No to wind this crap up, when I don't like heads but options are cheap I still throw in couple of grands sometimes it pays off sometimes if does not... For example, ERIOB last year provided me 500% profit while there was nothing in heads for me.
On top of the above mention criteria, there are also rules when I buy options...
Long expiry (more than 2 years) large position
Medium expiry (more than 1 years, but less than 18 months) medium size position
Short expiry (less than a year but more than 7 months) Small position
Really short expiry ( less than 6 months, can be few weeks) maximum of 5k normally 2-3k...
Also, the exercise price must be reasonable... Normally less then 52 weeks high or there abouts otherwise heads must meet all of the above criterias...
There is a list of almost 100 options which I am currently watching. I update that list almost every day. I keep an eye on capital raises where options are attached and regularly check price movers as they often have options.
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