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What is a "Lotto" play? Total speculation.
You have a slight chance at making money on these plays. They are NOT
meant to be played with money you need or are trying to build your
account with. They are for an occasional long-shot against stocks with
earnings surprises, splits or unusual options activity. Most of the time they
will result in a ZERO-SUM-GAIN. Once in a while you will hit one of
these, and that could bring you out of a loss to a very nice profit.
I put these here to show you the futility of
playing these types of trades with large money you cannot afford to lose; however, If you do them, then you MUST
realize they are pure "Vegas Style" gambling odds. You should only use small amounts of money that you
take from profitable trades to play these picks and when you hit a
monster winner you can add more contracts for the next one. (see
my training on compounding)
l
= SPECULATION - The ONLY time I recommend you take a shot
on these is during options expiration week or ahead of a very big news
event or
earnings announcement. If you do them during expiration week, you have
zero time premium decay and any movement in the stock gives you the best possible profit
opportunity. Occasionally I do them earlier in the month if I anticipate
a big earnings announcement or news event that could potentially move the stock 10% or
more.
l=
UNUSUAL OPTION ACTIVITY - These can be played anytime. You should buy at
least one month of time if you have less than two weeks to expiration, or
purchase the strike that is receiving the volume. These are not for the buy and
hold mentality. You have to be ready to take a quick profit and that can
happen the very next day or within a few days. I recommend if you cannot
watch it, then put in a profit sell order (make sure to tell your broker
it's a GTC order (good til cancelled) at a minimum of 30% over your
purchase price...but you have to decide how much risk you are willing to
take.
l=
SPLIT - These are typically played a few days before the split or right
after the split date.
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