The option premiums are very high on BOIL, even on the deeply in
the money Calls, here's an example, see the attachment
Selling Deeply in the
money Calls example
Sell Sept 25 Calls for $15.3, the price on BOIL is $39, (39-15.3
= 23.7), which means that BOIL has to fall below $23.7 before you
lose money. As long as BOIL is trading above $23.7 by Sept
OPEX, you make money.
Basically as long as BOIL stays above $25 by Setp OPEX,
you make $1.30
premium.
There is always a risk, that's how trading is, but it seems
unlikely to me to see BOIL trading below $25 by Sept
correction to my previous post, I had a typo and said Puts, but
I'm actually referring to the 25 calls for Sept selling for $15.3,
NOT the puts. Basically you are selling deeply in the money
calls
my point regarding the deeply in the money call options is that
you generally don't see a premium like that i.e. still making $1.3
for call options that are 15 points or 50% lower on the stock.
In most cases, deep in the money call options might only
trade at a premium of a few cents, which is not worth it. In
this case, you make about $1.3, the premium is lower with respect
to calls that are closer to price, however in exchange for that you
get a a greatly reduced risk factor i.e. BOIL has to dip below 23.7
before you lose. that means BOIL has to drop over 40% before
you risk losing money. Otherwise any close over $25 by Setp
OPEX get's you $1.30 because you get to keep the premium without
owning the stock.
I generally get the feeling that most here either don't trade
options, or understand it, or both via the lack of comments
I truly appreciate information such as this which points out
market conditions we can take advantage of. I can and did trade
options on BOIL today. Thanks for this information and all you and
Steve do.
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BOIL Options, and example
Posted by matt on 19th of Jun 2012 at 03:03 pm
The option premiums are very high on BOIL, even on the deeply in the money Calls, here's an example, see the attachment
Selling Deeply in the money Calls example
Sell Sept 25 Calls for $15.3, the price on BOIL is $39, (39-15.3 = 23.7), which means that BOIL has to fall below $23.7 before you lose money. As long as BOIL is trading above $23.7 by Sept OPEX, you make money.
Basically as long as BOIL stays above $25 by Setp OPEX, you make $1.30 premium .
There is always a risk, that's how trading is, but it seems unlikely to me to see BOIL trading below $25 by Sept
correction to my previous post,
Posted by matt on 19th of Jun 2012 at 03:39 pm
correction to my previous post, I had a typo and said Puts, but I'm actually referring to the 25 calls for Sept selling for $15.3, NOT the puts. Basically you are selling deeply in the money calls
http://breakpointtrades.com/blog/post/202884/
my point regarding the deeply
Posted by matt on 19th of Jun 2012 at 03:53 pm
my point regarding the deeply in the money call options is that you generally don't see a premium like that i.e. still making $1.3 for call options that are 15 points or 50% lower on the stock. In most cases, deep in the money call options might only trade at a premium of a few cents, which is not worth it. In this case, you make about $1.3, the premium is lower with respect to calls that are closer to price, however in exchange for that you get a a greatly reduced risk factor i.e. BOIL has to dip below 23.7 before you lose. that means BOIL has to drop over 40% before you risk losing money. Otherwise any close over $25 by Setp OPEX get's you $1.30 because you get to keep the premium without owning the stock.
I generally get the feeling that most here either don't trade options, or understand it, or both via the lack of comments
Please keep that sort of information coming
Posted by chuckw on 19th of Jun 2012 at 04:26 pm
Matt,
I truly appreciate information such as this which points out market conditions we can take advantage of. I can and did trade options on BOIL today. Thanks for this information and all you and Steve do.