Lenny Dykstra Takes a Swing at Wall Street

If you trade options, Dow Chemical is the perfect candidate right now. But I must warn you -- 99% of the public loses when it comes to options. They lose because they try to hit the home run. They pay 50 cents for an "out of the money" call: that's comparable to trying to draw to an inside straight in poker; i.e., it's not happening. The winning option player buys a deep in-the-money call that goes out three or four months. Options are a great tool to use as leverage (to control a lot of shares for little money).

An investor who doesn't want to put up $43,210 to own 1,000 shares of Dow Chemical can buy a deep in-the-money call. That is the beauty of options: leverage! The investor can control 1,000 shares of Dow, all the way to the third Friday in January, for $4,700 by buying the January $40 strike. You only put up $4,700, and you have until the third Friday in January to exercise. By then, I think having the option (i.e., the right) to buy Dow Chemical at $40 will be a winner

The goal of this column is to help you better understand the market and, ideally, make some money. In addition, I'll share some reflections on life and baseball, as the anticipation and excitement surrounding the picking of stocks can parallel the anticipation and excitement of a pennant race. There are similarities in the subsequent ecstasy or agony, depending on outcomes.

Stocks, the pennant race, life. Stay tuned for more and stay focused.

Off the Field

Alas, life mimics sports, sometimes in perverse ways. Recently, Hurricane Katrina descended on the Gulf Coast, throwing 140-mph fastballs with unpredictable movement. She made Nolan Ryan and Steve Carlton seem like Little Leaguers.

The uncertainty, fear and ongoing devastation experienced by the people of New Orleans and surrounding areas borders on the incomprehensible. If there is anything positive to be found in the wake of the catastrophe, it's that Katrina reminds us what's really important -- our health, our families, our security. For investors, the storm provides an important lesson about maintaining proper perspective.

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