Ok, I need a little help buying the right option here while its in the red for the day.
What would you guys go for? Right now I have a Nov 16 $190.
Not going for big bucks, just trying to educate myself.
My belief, which I think is in line with most other here, is that Q3 earnings will be significantly above estimates. I want to capitalize off that.
Few things to note:
Premium Decay is greatest the last 4 weeks. (Regardless of the stock movement - you will lose premium every day)
For that reason buying 45 days out or more (90 is good) you will see less premium decay over the next 3-4 weeks (almost not noticeable)
So even if you will only keep the option 3 weeks - if you buy Nov option you will lose almost all the premium, where as if you buy Jan calls - you lose very little premium over the next 3 weeks
On your 190 calls - since it is currently Out Of The Money - everything you paid is 100% premium. Between now and Nov 16 - that will all decay to 0
If you hold to expiration - the stock will have to close over about 202.00 for you to break even
Right now - If I expect to hold the option 1 week or more - I am buying Dec and Jan options.. Daytradeing I do buy Nov options (with day trading - premium decay not an issue)
I almost always buy Delta 70 or higher options - Keeping in mind Delta can tell you how much your option will increase as stock price increases.
a Delta 70 really means for every $ 1.00 the stock goes up - the option will go u $ .70 (premium decay still working against you tho)
Daytrading I may buy delta 90 or 100 to capture the full stock movement
I am sure others have different opinions/strategies