Dykstra: Best Buy Options Are a Better Buy

All in all, there are many variables to consider, and that is why there is no perfect stock-picking method, and no magic formula that can guarantee results all of the time. But with a lot of hard work and dedication to the task, we can come close.

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Lenny, two quick questions.

1.) Should I understand your results to be that you had only one losing trade in the last seven months?

2.) Why are most of your trade profits in the $1,000 to $2,000 range but a few of your trades much larger? I thought the approach was to limit gains to $1,000 to $2,000 and exit.

Thanks for the time and the good practical thoughts on investing.

-- George

Dear George, In response to your questions:

1.) Yes, this is correct -- check out my Stat Book.

2.) According to the tenets of my DITM calls strategy, when a trade opens and closes fairly quickly to our advantage, it will produce consistent $1,000 wins.

However, there are times when it is important for the success of the strategy to add to the position to average the cost basis as the stock moves down. So when we get a nice bounce and the position closes out, there may be several contracts open, which add up to additional profits for the win column.

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Lenny,

What is your thinking on Massey Energy (MEE Quote), which you bought more of with Motorola. Are you dropping the selling price below the standard, cost plus $1? We appear to be swimming upstream on this one.

-- Kevin

Dear Kevin,

As of the market close yesterday, Massey Energy is the only remaining October position still in play. If you are trading along with me, it is very important to keep a close eye on the Stat Book and the good-till-canceled selling prices you will find there. When an open position consists of several contracts, in order to close the position and free up capital for newer DITM calls, I will lower my target selling price to less than the average plus $1. With Massey, the current average cost is $3.84, and my recommended GTC sell target is $4.30.