Ansoft Calls Look Firm

Ansoft(ANST Quote), a leading developer of electronic design automation software, is the perfect secular play on technology. It's almost like a mini-ETF on the sector.

In buying Ansoft, investors buy into cell-phone, microprocessor and computer game growth -- basically the continued miniaturization of electronics -- as well as the replacement cycles of all of these products in new-generation versions.

Ansoft offers answers for engineers who design electrical hardware. The company's electronic design automation (EDA) software analyzes electromagnetic interaction and helps design and test devices such as integrated circuits, antenna and radar systems, and microwave components.

The company's customer list includes Boeing(BA Quote), Intel(INTC Quote) and Motorola(MOT Quote). Plus, Asia accounts for more than half of sales.

This is a software company, so gross margins are sky-high, but more importantly, it's been consistently free-cash-flow positive since 2003. All of this supports my decision to make this stock my deep-in-the-money call today. I have an order to buy 10 January 25s (UZDAE) for $6.50, or better.

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Now, as we do every Friday, let's take a look at some of your questions.

How would you suggest new investors with limited funds use you techniques? Most of your calls price around $10,000, which represents far too much of my portfolio to risk on any one trade. Is it worth it to cut the position size down and still go deep in the money? Thanks for a great column.

The DITM calls strategy works just as well for the trader who needs to invest in smaller increments. Just remember that each contract purchased, when closed out for a win using my DITM calls strategy, will typically yield $100 in profits. So if you were to buy only one contract, when the trade closes for a win, you will profit by $100. If you were to buy five contracts, the profit would typically be $500, and so on.