Chancels, I always, always, write short dated options and I more than often always buy time. Take CNQ for example.
With the stock at 65.40 right now, the 65 strike calls for June, July, and December, for example, are at 0.95, 2.85, and 6.60 on the bid. You are getting 55 cents for 4 days, 2.45 for a month and 4 days, and 6.20 for 6 months and 4 days. Let's forget about the 4 days, because if we extrapolate it into a month, it would suggest that in 22 days we would get 5.5 times 55 cents, or a monthly premium of $3.03. The July calls suggest the monthly premium is more in line with $2.45 of time value.
If you wrote monthly options on CNQ at the money (or just 40 cents in the money) for 6 months, you could collect 6 times that $2.45 premium, or $14.70, versus the $6.20 for the December calls. Hence, I tend to write short term options unless I truly believe the stock will be much lower by then where you can write the deep in the money call and use proceeds to buy puts. Just my opinion.
Best regards, |
