Comment Question - Nortel Stock or Options?

Thanks for the comment, Anonymous. I was thinking about how best to give you my opinion on what I would do.

Here is a good article that gives the general concepts for others considering options trading;

http://www.investopedia.com/articles/optioninvestor/03/073003.asp

Because of the volatility with the company right now, I have no doubt that the stock price would rise over the next 6 months for a substantial gain (beats indices). However, with all the management changes going on right now with Nortel, and other factors (growth, etc.), I think that the options for Nortel are risky right now...what I think is, there are more variables affecting the volatility than what can be accurately predicted.

That being said, sure, if you had some money you wanted to risk, and after understanding all the volatility behind the premium, then yes, I would do it. The one thing that would hold me up personally right now, is that I don't have a portfolio diverse enough to take the risk. Its also hard to answer your question without understanding more of the contracts you are considering.

To put in perspective, I would option HP before Nortel, based on the what I see. With increased volatility, comes increased risk and reward.

Here is a blog I read every day, Phil's World, which gives you a good handle on what all is involved with options trading. Read about his risks and rewards.