Jeff,

When buying calls or puts, do you tend to trade the ATM option or one OTM? How do you account for delta? Your returns are awesome, and the loss can't be much because your options start out with a small value. I am interested to hear your strategy.
Thanks,
Amy Myers

Jeff usually goes for OTM options.

Jeff,
I also have the SHLD call option once it broke out of the cup and handle.. it was a profitable trade and then it turned today. Do you risk all the profit for the target? Does anyone have any good rule to protect profit? I usually only want to risk 20% of my profit to the up-sides.. obviously got stopped out a lot and then I re-enter when it shows strength again. Please advice.

I'll answer for Jeff since i've heard the answer so much it haunts me...

The pattern has only failed when the stock reenters the breakout point. In fact, in most cases you should EXPECT a retest of old resistance as new support. Until the stock breaks new support, the pattern is still working for you.

If you're going to trade breakouts, you need to be willing to watch your gains evaporate and have patience. You were obviously expecting a much larger move in SHLD over a much longer time period. The stock will not hit its target in one quick move. there will be a series of ups and downs.

See CTSH for more on being patient with breakouts.

Speaking of CTSH, why isn't that on the list?

In following the first post, I know that Jeff tends to buy OTM options, but I'm still wondering what more criteria there is than that.
The approach is not simply to buy one or two strikes OTM. Or is it?
I understand the IV smile with higher IV impact on pricing at ATM. But I still don't feel like I comfortably understand when and why to go OTM and when not.
Any help much appreciated.
matt

Hey Matt,

The reason I didn't include it, was I was trying to follow up on the Anticipating the bounce trades, and the price pattern trades. For your convenience, I added it to the list. The list of stocks is not all my trades, just the ones I specifically mentioned I was following up on.

Brett, thanks for your post.

Jeff

I was just online with one of my coaches and he recommended the "Anticipating The Bounce" search. Is there a difference between this search and "Anticipating The Bounce II", is one bullish and the other bearish??
Today was my first day on your blog and I'm looking forward to refering to it each and every day. Like most of us "Education is Key" and you are a true teacher. Thanks for asking for our input, I hope you can see that we are not just looking for your advice but your knowledge.
Thanks again.