Dykstra's Deep-in-the-Money Call: Delphi

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News that Wachovia(WB) chief exec Ken Thompson had been pushed out by the board Monday morning rippled through the market. The Dow shed 134.5 points, while the S&P fell 14.71 points and the Nasdaq sank 31.13 points.

However, amid the selling, Tesoro(TSO) got logged in the win column. Tesoro was my featured pick on April 23. The company had been getting absolutely hammered and I thought it was an absolute steal at that price back then and would put me in great position to grab a win. However, Tesoro required a little more commitment and intestinal fortitude.

At 40 days, Tesoro stayed in play longer than any of the other wins to cross the finish line so far in the 2008 season. That's not that long because we typically go out four to seven months with most of the picks. However, Tesoro also required a few rebuys.

The stock went south after I bought it, so in order to put ourselves in the best possible position for a win, I needed to employ a crucial part of my system: taking advantage of the next buy level. If you are not familiar with this concept, pay very close attention.

Essentially, when the price of an option goes down, it may be necessary to purchase additional contracts at a lower price in order to achieve a win more easily. The reason for the additional contracts is to lower the average cost you pay for each contract, which will also allow you to lower the sell price and still achieve a win. The next buy level, which I will update each day in my Stat Book in the newsletter, is the price the common stock must fall to before it's time to buy 10 more options at a lower price.