http://www.options-trading-education.com/7123/timing-options-purchases/
Timing Options Purchases
Timing options purchases can be as important to success in options trading as accurate technical and fundamental analysis. Whether one uses a long options strategy or a short options trading strategy, the most efficient use of trading capital is to enter and exit the market rapidly and with the maximum profit. In trading options on commodity futures such as corn, wheat, soybeans, or coffee, traders keep track of weather trends. A drought in Brazil might affect coffee production or the soybean harvest. A dry year in the Northern Great Plains may reduce the harvest of winter wheat. Knowing that the weather might affect the price of options on commodity futures is useful. But, for timing options purchases, traders need to have clear idea of when prices will go up, or down, and make sure that they are not caught in contracts at options expiration dates and before prices move as expected. It is always possible to sell one contract and buy another to retain the option. However, it is typically more profitable when timing options purchases is done most efficiently.
Does Style Matter?
Trading American style options versus European style options can make a difference when timing options purchases and sales. The issue is getting out of an options contract in a timely manner. If a trader does not think that he can exit a contract profitably before it expires this might affect his timing of options purchases. Trading American style options lets the trader execute his contract any time during the contract period. Trading European style options locks the trader in until the moment of expiration. However, in each case the trader can exit the contract by executing the opposite trade. If the issue is simply one of getting in and out with a profit instead of actually buying or selling the equity in question, either style works just fine.
