Help choosing a strike and expiration date

Hi all, this pull back has been pretty damn good to me and I'm already playing with the houses money with two targets left before I'm out of my shorts completely.

I have started working on a buy list to be ready when I get the buy signals and there are two stocks in particular that I feel so strongly about I want to leverage with options.

My experience with options is pretty limited. I usually only trade options that I think will create investor excitement or nervousness going into earnings and I'm am almost always out before earnings. For this strategy it is relatively easy to choose a strike and expiration, but playing a bottom or bounce is a completely different animal.

BTW the two stocks are CAT and NFLX

I know that many people use the Greeks, but I still can't make the connection as to how to use them for entry, strike, exp, etc. 

So... looking at NFLX if I wanted to enter the trade today my target would be $120 and my inclination would be slightly out of the money calls and baring any other catalyst I'd probably go with Sept calls (after earnings).

That's just my simple and probably less probable strategy I'm kicking around. I was wondering how some of you option pro's would approach this trade if you felt like I do.

I wanted to ad that my brokerage acct has a probability tool and it only gave my target a 19% chance by Sept., lol.

...So Don't Trade It Based on This Post!!
 

I'm kinda suprised that I didn't get responses like "read up on the Greeks" and "don't buy if the IV is above/below x". Guess I'm not the only one not using the Greeks, LOL

Quote:

Originally Posted by StockJock-e 

Honestly, NFLX here at $70 is a long way off from $120, it will take some major buying momentum to get it going there, but I guess anything is possible.

 

If I was going to try something like this, I would give it a lot more time to play with, so maybe the Dec 120 calls.

Thanks SJE, $120 is my "were I think it could go" target, but I was actually thinking about slightly out of the money calls maybe 75's or 80's (after the knife stops falling it could be 65's or 70's). There are several reasons as to why I am so bullish on NFLX but to name a few... there is good commentary here and I always love strong insider buying. These guys really love the price since April - See here.

Quote:

Originally Posted by rst 


Stevie_B, give yourself a well deserved pat on the back!
Your target of 1280 S&P a week ago is now within range.
Excellent analysis!

Thanks rst,  That was more than likely 80% luck and I have been calling that target for a few weeks now (since the MACD and MA (10) signal). As for CAT I think I can make a strong case and maybe I can put it all together and post it on the CAT thread this weekend.