While I think AAPL is a good stock, the leaps have too high a premium for me to buy them. At this point, I also think the stock may be overpriced. My stock picking system has recently identified AAPL as an “almost buy.” However, I probably will not buy it in near future, since I think other buys will have more potential for gains.

With every winning trade, there is a loser of course. But for experienced options traders, they have a concrete trading system, and know how to make money from profitable trades, and when to ditch the losers.

I didn’t mean that everyone makes money. I guess I should have said “the experienced traders make money.”

Also, I am beginning to sell puts to enter positions as well. You and Super Saver implement a very smart technique that I wish to utilize.

P.S. Time value really hurts on the losing puts!

@ Super Saver

Excellent trade! Leaps can make you a lot of money. Any thoughts on Apple 2008 Leaps? The iPhone releasal is going to be huge in my opinion.

Thanks for the link. I guess it’s a common misperception on the number of total options that expire worthless. Glad you provided me the correct info.

Anecdotally, I agree with your point on making gains on options. In 1998, I doubled down on a losing postion on INTC Jan 1999 leaps. In October, 1998 the Jan 120 Leaps were $0.25 and INTC was $70. INTC rose to 125 ish before the expiration date. I sold the leaps at $3, $4 and $5 dollars. Wish investing were always this easy and profitable:-) To note, this was an abnormal win for me.

I thought I had replied already. Apologies if this comment is a duplicate.

I sell naked puts on stocks which I am will to have long postions. I have cash backup, if the options are exercised. I consider naked calls too risky.

Thanks for the clarification on options results. I don’t recall where I saw the data. Looks like about 75% of options that go to expiration become worthless. I didn’t know that 60% of positions were closed out before expiration.

Actually 60% of options contracts are sold back into the marketplace, 10% of options contracts are exercised, and the remaining 30% expire worthless.

Do you sell naked calls and puts? or do you cover yourself with the backup cash?

Nice series on options trading. Good luck on your AMZN puts.

In my experience, I have made the most money on selling puts and calls. I think 80% of options expire worthless, which is in the favor of the options writer.

Also, good point on the clever casino terminology. We could all learn a thing or two from the casino industry.

I feel the same way about Calls. I’ve had better luck identifying undervalued stocks than overbought stocks. It’s easier to pick out “uncovered gems” because they are sometimes so cheap and forgotten about.

I’m thinking puts because the bullish Dow trend has got to end. Seriously, when will we see a correction?