It is also important to consider the time or the date at which one should enter the option market. While these option-buying suggestions are presented in the context of day trading options, they apply equally as well to option position trading. When day trading, a trader must give the market adequate time to perform. Consequently, eliminate day trading within the final hour of trading. If one is position-trading options, this suggestion should not be a concern.

• Avoid trading in an illiquid option market.

• Avoid purchasing call options just prior to a stock going ex-dividend. Avoid buying or selling options based upon anticipated news (buyouts in particular). Besides bordering on unethical trading, the information received is more likely to be rumor than correct.

• Avoid purchasing options well after the market has established a defined trend - this is especially true when day trading, as any option premium advantage will have dissipated.

• Avoid purchasing way out-of-the-money options when day trading, as any favorable price movement will have a negligible effect upon premium.

• Avoid purchasing call options when the underlying security is up for the day versus the prior day's close, unless one intends to take a trend-following stance.

• Avoid purchasing put options when the underlying security is down for the day versus the prior day's close, unless one intends to take a trend-following stance.

Be careful when holding long option positions beyond Friday's trading day's close unless one is option position trading. Many option theoreticians recalculate their volatility, delta, and time decay numbers once a week, usually after the close of trading on Fridays or over the weekend. The resulting adjustments in these values most often have a negative effect on the value of the long option, which may be acceptable when holding an option over an extended period of time but is detrimental when day trading.

Each sample strategy is accompanied by a graph of profit and loss at the options' expiration. The X-axis represents the price level of an underlying stock. The Y-axis represents profit and loss, above and below the X-axis intersection respectively. Each graph will be labeled with a Break-Even Point (BEP) for the strategy being illustrated. These graphs are not drawn to any specific scale and are meant only for an illustrative and educational purpose. In addition, each strategy includes a discussion regarding an investor's alter-natives before and at expiration. The alternatives mentioned are only among the more basic possibilities. With a fuller understanding of option concepts, an investor will appreciate that alternatives available to him are many. It is beyond the scope of this booklet to make any specific recommendations as to maintaining your option positions.

Note: Net profit and loss amounts discussed in the following strategy examples do not include taxes, commissions or transaction costs in their formulations.