Digital Man
You're right, the net impact on calls are difficult to predict during a stock split. I've gone through two, which changed my perspective and strategy. CPQ post split was up $4 after earnings announcement. Feb call buyers, pre announcement, did well if they sold mid day or after. However, this movement had more to do with earnings and projected growth than it did on the functional value of the option, IMO. Hindsight is cheap. I sold the Feb 32.5 early in the day at 7/8. My goal is to secure a return. Being greedy is sometimes costly. I was too worried about the run-up from post price of $57. The actual return is satisfactory. Hope to do the same next month. My concern is that CPQ maintain $30.
Regarding the Feb $35 calls, net .25 isn't bad when $5 out of the money. Depends on your point of view on who is getting hosed. One month out and $5 beyond strike price is considered quick money by some. CPQ primary trend is up which makes the Feb 35's attractive. The 15,000 contract you mention are probably the result of funds repositioning, (Don't ask me how)
Mike Gordon |
