Much Ado About Everything

I'm finding it difficult to find a topic on options that's important enough to discuss, when so much turmoil is going on in the world.

Of course, I'm neither an economist nor an analyst, and don't have anything to contribute on the problems of General Motors (but I do have an opinion) or the horrible situation in which more and more people finding themselves without work.

The future is worrisome, and I'm hoping a new administration will inspire bipartisanship and more confidence in consumers everywhere. But, even if it does, inauguration is still more than two months away.

The way the stock markets of the world are acting, there's no way to predict if this is a great buying opportunity or if the bear market has barely begun.  I do know that this is not an ideal situation for premium sellers – and that's my basic approach – most of the time. 

It's difficult to buy options at what appear to be elevated prices, but the huge up and down moves in the stock market have made such a strategy a winning play.  Sadly, I cannot bring myself to buy straddles and strangles. 

What I do know is that there's a great deal of risk and reward potential out there, and this is no time to take additional risk.  Thus, I advise trading an appropriate number of option contracts so that if all goes badly, your losses are reasonable.  And if you win, that your profits are sufficient to make taking that risk an intelligent play.

It's a scary world out there.


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