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Options Make a 'World' of Difference

By Bryan Perry

On Feb. 20, I knew the time was right to establish a position in CMED calls at the $50 strike, and I predicted that it would be a fast track to profit. And, just five days later, I recommended that my readers take our profit off the table after the position moved from $4.10 to $7.50.

While this trade was nothing but smooth sailing, keep in mind that when you purchase stocks on overseas markets, such as the Shanghai Composite or the Hang Seng, you are buying stocks in the local currency. Although your account with be debited in dollars, ultimately those dollars must be converted and given exchange and commission fees.

Also, given that options premiums are based on the price of the underlying stock, volatility and time (among other factors), the premiums for foreign options can become inherently more expensive.

It's also important to note that, after the host of U.S. corporate scandals, the Sarbanes-Oxley Act came into play to keep domestic companies honest and investors in the clear. But, those accounting regulations only apply to U.S. companies, and stocks that are listed on foreign exchanges are not obliged (or even expected) to follow the same regulations. In China, where many companies are government outfits, this is especially true.

Yet, no one is arguing that there is the potential for profit by the rise or decline of today's "hot" stocks, but you can reduce the risk of playing foreign stocks by buying options on them in the domestic markets.

While domestic markets offer a seemingly unlimited amount of "options" for traders, you can satisfy your craving for some international flavor without having to stay up all night watching your portfolio to see what happens during the overseas trading day!

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We're playing the options markets for profits in Bryan's Tactical Trader service, with a healthy balance of put and call options in names that have some serious movement in store. Click here and get in on this week's options trade!

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