If you are playing calls this is when you buy what they call
" dipping undervalued calls ". Many times you will have 2-4 chances
to make this play before the stock actually splits. Just make sure you
carefully observe the chart patterns to confirm that the stock is pulling back
and that there is a turn back to the upside. Establish your exit points by
looking at the prior highs.
PAY DATE - Historically, this play has very high odds of
success and profit. If you are
playing options, this play has you buying the stock or
option the day before the split.
Pay careful attention to the stock pattern
during the week of the stock split pay date. Hopefully, you should be observing
an upward pattern or at least a sideways channeling. Your best odds are to hold
the option throught the split ( note: you will now have twice as many options
since they also split ). Sell your options within 2-3 days of the split, your
odds are better if you purchase the closest month of the "
out-of-the-money " call.
And please remember that there will always be other plays,
so if the stock is tanking one or two days before the pay day, don't play it!
Wait for the next one to come along that meets these guidelines .
POST SPLIT PLAY - Usually, the leaders in their industry
group, such as Dell
Computer, Intel and Microsoft, those companies that we the
general public and trading
institutions most easily recognize, have a greater chance of
moving upward than those that do not split.
Here again, observe the charts for a long dip and profit
taking before you buy long term "in-the-money" options. If you
already own the stocks you can write ( sell )
"out-of-the-money" calls to collect premiums and
have good odds of being "called out" with a nice capital gain.
0 comments :
Post a Comment