I speculated in Monsanto (MON) on May 13, 2010 and wrote an article backing my thoughts on my action. That speculation turned out to be a complete loss, 100%. While this trade turned out to be a complete loss, I noted that my option contract once bought was considered worthless. This is the nature of the risk in options. Investors and traders should only risk discretionary capital when venturing into options.
The chart below shows the buy point, strike price, and current price.
When I entered this trade, the RSI (top indicator) was at an extreme oversold condition. As a result, I assumed that shares would rebound to at least the $60 range which would allow my Call option premium to be worth more. Although the RSI moved up from the depressed level, the price failed to do so. A gap down in late May only made matters worse. However, if you expect the worst and you receive the worst, you're at breakeven. That's how I view this trade.
So far, buying Calls or Puts to speculate have proven to be a losing proposition. Using options as a hedge may be a better use but we'll have to wait until the next opportunity arises. The Qualcomm trade, however, is still on track.
