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TheStreet Open House

You Still Make Money With Onyx

Will the options probably expire worthless? Yes, you shouldn't buy put options in hopes of realizing a gain in this case. The reason they make sense for some investors is the same reason you buy homeowners insurance. You don't expect to use it, but on the off-chance you need it, you're happy to have it. At $3, it beats taking a sleeping pill.

If you're an outsider with your nose pressed against the glass, wishing you could join in on the party, it may not be too late.

If you think bidders for Onxy will catapult shares higher, you also can use the above-described method of limiting risk. Speculators can buy shares at the current price while limiting total downside exposure to $16 ($3 for the November option and $13).

If bidding heats up and shares increase to $140 or more, you participate the whole way (while simultaneously neutralizing "friendly neighbors"). In order to profit, the shares need to appreciate at least $3 more than your purchase price.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Robert Weinstein currently blogs, mentors traders, and writes several weekly columns in Rocco Pendola's Option Investing newsletter from his home in northern Wisconsin. Robert tends to focus on the psychological importance of goals, risk mitigation, emotion, and relatively short term market exposure. With nearly 30 years of studying and investing experience, Robert has experienced the many ups and downs in the financial markets and uses the knowledge gained to maintain balance. Robert believes the best way to make money investing is to avoid losing it. The best way to avoid losing is to know what emotional traps lay in the path of investors and learning how to avoid them. Robert is a voracious reader of financial related books often completing more than one book a week while not trading or writing. Robert contributes to his blog at paid2trade.com on a regular basis with an emphasis on studying behavior finance.


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