CVA and CMC revisited with options

I keep looking at the options that I am trading now and consider that what I am doing is the best method for the style of trading that I am pursuing... but those cheap ATM or OTM options look awfully tempting.

I bought two new option contracts this morning, CVA and CMC...both of which I have trade stocks in my new plan recently and both are using the Point and Figure entry method.

In CVA my entry trigger for the stock was between $17.25 and $17.50, and I even entered a stock order at that limit initially as I wanted into the market at that price. This gave me time to investigate the options. The price hovered around $17.30 for a while, I entered the option data into my spreadsheet, decided upon the option, cancelled the stock order and placed an option order. Strike was $15, expiry Jan '10. In at $2.90 after playing with $2.80 and $2.85 for a while.

Option cost $2.90, $2.25 ITM so 65 cents Extrinsic Value, 22.4% of the price was EV.

CMC was, more or less the same deal. $16.75 to $17. Option was the $12.50 strike, Jan '10 expiry.

Option cost $5.10, $4.25 ITM so 85 cents Extrinsic Value, 16.7% of the price was EV.

Looking at my sheet comparing the various strike prices with their EV based on paying the asking price (which I didn't) makes these look like the best deal as the Deltas are high and the EV was relatively low.

Then I consider the element of risk. Options reduce risk in the sense that they are somewhat unaffected by some attributes of the stock activity...CAH example as I would have lost over 50% of the value of my stock only position where I did better holding my own in the options.

Let's just see where these trades take me going forward.

Jeff.