rolling long calls up to follow a trend

[traderlux]

Quote from Visaria:

By rolling up, you mean buying a call waiting till the underlying goes up, sell the call and then buying a higher strike/later expiration, repeat?

Can be v profitable if the trend persists.

visaria,

yes, that is what i was refering to. have you traded that way?

(see my response to red.)

i see the question of ditm, atm, otm, or wotm as one of conservative vs aggressive, what do think?

tia,
t'lux

 

[atticus]

Quote from athlonmank8:

That's circumstantial. The tails are fatter farther OTM. If you're good, (or you're "good" *wink*)....OTM are almost always the way to go.

Fatter on the upside?

 

[Visaria]

Quote from traderlux:

visaria,

yes, that is what i was refering to. have you traded that way?

(see my response to red.)

i see the question of ditm, atm, otm, or wotm as one of conservative vs aggressive, what do think?

tia,
t'lux

Unfortunately not. I came across the idea in a book i read in my university library ( i think it was by Geoffrey Chamberlain) many years ago now. I totally forgot about it until you mentioned it. I think going with ditm is NOT a good idea, you need a good deal of leverage so atm or slightly otm is better. You can literally make a fortune with v llittle risk if the trend is strong enough and you are in a big move.

I certainly do want to look at it now (will have to wait though until I'm back from vacation) , thanks for the heads up!

 

[drcha]

There is plenty of leverage with DITM near month calls. Pick a very liquid underlying that has decent B/A spreads down there. Use the q's or something like that. Try delta=.9 or so. When you have made 25-35% on them, roll them up, and out to next month if necessary. Roll them out in early expiration week if you still like the U/L at that time. No need to increase your position, pyramid, or use pie-in-the-sky OTM options. You can make plenty of money in a strong rally like this.

Of course, you can also lose every dime. So stay small. Get out when the U/L loses steam. This is for a small portion of your account.

 

[Visaria]

Good advice. I would use maybe quarter of a percent of your acct.