Hi Johnsto:
If I'm reading your post correctly, you bought some OTM calls on EMC last Friday, which was during January expiry, and, depite a four point move up in the underlying, the calls deteriorated by Tuesday.
I can think of two explanations for this:
1. You bought the calls when they were "back month". There is always a decline in the value of an option, all other things being equal, when it moves to the front month, as yours did.
2. You probably were met with a volatility implosion as well, meaning that EMC, despite having moved up, began to tread water on Tuesday, wich decreases the implied volatility portion of the option, thus deflating the value.
I agree, this sucks. If I were to buy options that were to become the front month (after two days opf time decay over the weekend, no less), I'd go ITM, paying more but snagging a higher delta to somewhat off set the effects of time decay.
Does this help? |
