At www.bluechipoptions.com we often trade DIA index options. Much like the OEX, which represents the top 100 stocks or the S&P 500, (SPY), DIA acts as cash derivative options for the Dow.
You have heard so much of cash derivatives, and Bernie Madoff became infamous for “pretending” to trade OEX Options for massive profits.
The trouble with Bernie is that he simply “cut and pasted” the best buy and best sell, and posted the “results” to his investors, never really buying the option at all.
Cash derivatives options are meticulously explained at www.cboe.com
Effectively you are buying an option on the DIA at a “strike” point that is either far away from where the Dow is at that moment (called OTM, or out of the money, and not as expensive), or is “ATM-at the money” or “ITM”-in the money, both representing “strike points” either where the Dow is at that moment (ATM) or at a strike point “safely” beyond the current Dow.
Our Preferred Blue Chip subscribers receive detailed instructions on how we pick the option, and the specifics of our buy/sell and stop loss methods.
http://www.oexoptions.com/BlueChip/BCO-Subscribe.html
