Dykstra: Growth in Store

Your investing style is interesting and very similar to one that I use, which involves buying very beat-up stocks, but not with options. It is the only style of investing that I have found to work based on extensive back-testing and real-time trading. One question that I have, however, is, how much capital have you allocated, or do you allocate to the options trading that appears in your columns so that you have sufficient capital to buy all of your picks and also be able to average down? Are you allocating or assuming an account size of $150,000, $200,000 or some amount that is far in excess of what would be required? Thank you for your insightful columns.

I write the column with a selection for each day knowing full well that my readers will not be able to invest in all of my selections. There's no right amount of capital to have available for the strategy; however, I urge all my readers to never trade using margin and to use capital that they can afford to lose. My selections provide an idea for my readers who I hope will then use their own due diligence and select what they believe to be the best selections I offer.

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Lenny, my wife grew up in Flushing, and I grew up in Westchester, so we're big fans of the Mets and yourself. Congrats on your ongoing success! Question about your strategy of buying options that expire six months out that are DITM. I see you are picking only "quality" companies. This reduces risk. Why not reduce risk further by using LEAPs [long-term equity anticipation securities]?

Take Komag(KOMG Quote - Cramer on KOMG - Stock Picks) for example. Why not use the Jan 19, 2009, calls with strike price of $30 or $35 for $7.10 or $5.10, respectively? It seems that the prices are not much different than the six-month call options you are using, and it reduces risk considerably. Just curious. Thanks for your columns -- they are very interesting.

With the long-awaited and finally budding rivalry between the Mets and Phillies, it's great to hear that Mets fans still hold a special place for me. You pose an interesting question about the DITM strategy. I generally avoid LEAPs as they typically trade with a higher premium than DITM calls four to six months down the road. For what I am looking for, four to six months provides plenty of time for corrections in the market and the underlying equity to sort themselves out and implement the necessary strategies to succeed. There will be occasions where leaps provide the most effective DITM play; however, since my return to TheStreet.com, no such occasion has come up.

Always remember: Life is a journey; enjoy the ride!

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