Options Know-How: Wachovia, Barrick Gold

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How much do you know about playing the stock market with options?

The following are highlighted options insights and ideas from TheStreet.com.

From Dykstra: My Favorite Trades:

There are many good ones to choose from, but if I had to pick just one I would say Wachovia(WB Quote) is my favorite. I have picked this company twice this year. The first time was on May 21, and that pick turned in a $13,200 win after 72 days. The second time I picked it -- on Sept. 17 -- I went all the way out to January 2010 and selected the $7.50 calls (WVDAY).

The market got smoked last week. People were scared. They sold and sold, and the stock was punished unfairly with the rest of the market. The CEO of the company went on television, and I liked the plan he laid out. I knew this company was trading at an absolute steal. I was right. The very next day I won. I had invested just $5,000, and one day later I had a $1,000 profit on the trade.

Read the full version of Dykstra: My Favorite Trades.

From Mad About Options: Sept. 23 (Video):

Jud Pyle and Matt Buckley review Jim Cramer's recent comments about Barrick Gold Corp. (ABX Quote) and offer an appropriate options strategy.

Pyle: "What's going to happen is, [U.S. Treasury Secretary Henry] Paulson is basically going to create inflation. He's going to pump a lot of money into the system. Inflation goes up, value of the dollar goes down, gold has to rise... So one thing [strategy] we're looking at here [with Barrick Gold] is covered put sales... It's very similar to a buy-write, where the investors buy the stock and sell an upside call. Instead of buying the stock though, they just go out and they sell a put. In this case, October 37 and a half puts for $2.85. They [investors] sell that. What do I mean by covered? What's the most they can lose there? The breakeven is $34.65 or higher, so the investor takes the $34.65, puts in an account [and] forgets about it. So it's completely covered. The liability is covered."

To watch the video, click the player below:

For more information about Mad About Options, visit www.ONN.tv.