Before making an investment decision, I rely on my proprietary methodology, developed and fine-tuned over the last 20 years, in identifying the target company. Without divulging too much, I can however share the following: My methodology relies on a combination of macro economic analysis, sector analysis, general market trend(s), individual company's fundamentals and technical analysis to identify the right company. Though not necessarily in that order...
Here is the correct order:
1) When a potential company comes to my attention, the very first thing I do is to checks its stock's technical analysis using the Point and Figure chart. All potential investment opportunities MUST pass this initial test before I will conduct any further analysis...Period.
2) Should the company's stock pass my initial test (above) I then check the stock's relative strength versus its 50 day and its 200 day SMA.
3) Next I check to see whether the market favors the sector the company operates in or not.
4) If the company passes 1, 2 & 3 above, I then do an in depth analysis of its fundamentals, with especial emphasis on its cash position, debt, sales growth, profitability, insider buying, quality of management, etc.
5) The final check is the health of the general economy.
Only after getting my 5 green lights, will I take a position in the company. And once I have made my investment decision, I just sit back and wait for the market to recognize the value the company's stock represents. In other words, it is really a game of patience...And since this blog is all about using stock options to build wealth, I of course make sure that I buy the right option with sufficient time to expiration for me to make an adequate return on the risk that I took to make the investment...
How far out in time should that expiration date be comes from experience...
DISCLAIMER: All postings made here are strictly for my personal record keeping and in no way, shape or form, am I even remotely suggesting others to follow my Buy and Sell moves. Trading options is definitely not for the faint of heart as one's portfolio can move up, or down, anywhere between 10%-30% during a single trading day. Feel free to follow my progress here, but PLEASE do not follow my moves. However, if, in spite of all my exhortations, should you decide to do so, be advised that you, and ONLY YOU will be responsible for any losses that you may suffer...In other words, the onus is strictly on you.