The next of the
weekly options trading questions comes from a fairly new member to our service,
and is focused on buy-in price:
"Loving your options recommendations. I have
had some success with them.
I could have even greater success if some of the
take off from the opening bell and not pull back to
anywhere near the entry level.
Just wondering if you had any suggestions as to how
to play run away options
prices. What are some workable strategies used to
enter gapped up options?"
answer on June 25, 2021:
In many cases, if the stock is going to run after the
market opens, at some point it will pull-back to allow an entry, but
often-times this will be higher than that recommended.
For myself, at the start of the market, if I think an
option is going to be excellent I try to predict a figure just in-front of the
bid price, or even take the bid-price that is showing if quick enough.
An alternative is to take the market price - I must
confess I never do this - I love to control my own destiny - but this makes sure
you enter the trade.
In most cases the stock will pull-back during the day,
to some extent. An example of that is Palantir - one that I wrote about in the
However, you do get those that keep running higher
without much of a breather - such as this week with FedEx and Nike.
Remember, all this is good because that is what we are
after - stocks that are on the run.
Another way around the price increase, if you are
worried about the increased cost, is to take a strike price that is higher than
the one recommended.
If all else fails, tomorrow is another day, and there
are plenty more trades coming your way!