This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Don't Make the Dumb Money Trade on Intel, Sirius XM: Opinion

NEW YORK ( TheStreet) -- Roughly half of the articles I write deal with options. I also publish a weekly Options Investing Newsletter that targets relatively conservative long-term, growth and income investors, who like to speculate with a small portion of their portfolio.

Much of my work focuses on debunking myths and misnomers about options. Many investors never even consider using options because of the hysterical misinformation that abounds. They instantly consider options too risky, associating an options trade with little more than gambling. I have a theory as to why this is so.

With few exceptions, most basic options information flat out stinks. There comes a point where you can provide a novice with too much information. It's tough enough to wrap your head around the basic functions of calls and puts the first time you encounter them, let alone understand the nuances of implied volatility and the Greeks.

I am not saying these things do not matter or that people who use options should not learn them; however, to get started using options in the most basic fashion, you do not need to get bogged down in complexity.

In addition to information overload and the confusion it triggers, humans have a tendency to do too much too soon. We also desire instant gratification. If you're bullish Intel (INTC - Get Report), for example, you might be the type of person to psyche yourself up about buying deep out-of-the-money calls because you think the company will blow the doors off of the next quarter.

Sirius XM (SIRI - Get Report) is really the best case in point, as are other sub-$5 stocks. Scan the message boards on SIRI. You will see countless bulls scoreboarding about how many $2.50 and $3.00 calls they own. The same phenomenon ran rampant when Citi (C) was flirting just shy of the $5 marker pre-split.

We often want to go for what we perceive as the big score. And if an OTM call costs so little, we ignore the reasons why it is so "cheap" to focus on the massive percentage returns we can realize if the underlying stock hits our obscene and baseless price targets.
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
INTC $29.13 0.00%
SIRI $3.95 0.00%
AAPL $114.64 0.00%
FB $94.06 0.00%
GOOG $629.25 0.00%

Markets

Chart of I:DJI
DOW 17,550.69 -47.51 -0.27%
S&P 500 2,093.32 -4.72 -0.22%
NASDAQ 5,105.5460 -9.8360 -0.19%

Free Reports