p Ken Trester, Managing Editor p Jeff Carter, Senior Editor p Ron Jackson, Publisher

The Miracle Trade:  Call Options
by Ken Trester

"The key to success in the options game is price." - Ken Trester

Call options are a bet that a stock is going to increase in price.

It's also the bet option traders like to make the most. It's easy to open and close, easy to understand.

Buying call options can be a very profitable play since options cost a small fraction of actually buying the stock.

Instead of paying $35, $78, $112 or more for a single share of stock you can use call options to control 100 shares of stock for as little as $25.00. That's quite a bargain!

But make sure to select options that are cheap and underpriced, and are close-to-the-money (the stock price is close to the strike price). 

Also look for as much time as possible before expiration. 

Another way to get a good price is to find a stock that is moving in a two or three point trading range. Try to buy cheap call options when the stock is at the lower end of its range, and cheap put options when it is at the upper end. 

Entering Orders
When you buy options always use a limit order, which is an order that requires that you get your price or your trade won't be made. Don't use a market order, where you get whatever the asked price is when your order makes it to the floor of the exchange. 

Option prices can change quickly and you could end up buying an option for more than you thought you were. 

When I buy options, I am real patient and it may take four or five tries before I get an order executed. 

For example, recently I was trying to buy a Jan 15 Call when the stock was at 14-1/2. The bid-asked prices were 1/8 - 5/16. I never initially pay the asked price; I try to get a better price. So I entered a limit order to buy the option at 3/16, just 1/16 above the bid. 

Three hours later I got the order off at 3/16, and $18.25 (3/16) is a lot cheaper than $31.12 (5/16). 

The lesson here is that sometimes it pays to try to get a price between the bid and asked prices. A limit order helps you do that; a market order does not. 

How to Discover More Trading Opportunities
The key to success in the options game is price. Unless you know if an option is truly a bargain you cannot win! Bargain hunters who consider price first and foremost are the ones who consistently win the options game. 

Options market professionals ALWAYS use pricing formulas. They're constantly on the lookout for underpriced and overpriced options. So it makes sense that YOU need an options pricing formula that gives you that insider's edge. One way to find a real world workable formula is to use options software.  For more click here

For more about call options recommendations click here.