Dykstra: Filling Up on Anadarko Petroleum

Tuesday was a perfect example of why we buy deep in-the-money calls. It was the Dow's worst point decline since Sept. 17, 2001, the first trading day after the terror attacks, and intraday, the market was down as much as 546 points.

Standard & Poor's reported that the drop across the major U.S. exchanges hit every industry, and that a total of $632 billion in value was lost on the exchanges Tuesday.

This sort of day exemplifies why I keep my strategy simple. Buy quality stocks that are undervalued, without margin. By using my deep in-the-money call options, I don't have to panic when a crazy day occurs. Traders who use common stock must endure stock market swings that can be very painful. Deep-in-the-money calls, on the other hand, give us a significant time frame, usually four to six months, and we put very little cash at risk to control 1,000 shares.

Remember, this is not a "buy and hold" operation. Our goal is all about making money. We want to reap at least a $1,000 profit after we purchase our calls. To help us do that, we set a good till cancel (GTC) limit sell order, typically 1 point above our buy price. ...