Very conservative. Jan 2000 in the $ calls (in this case, 45s). The reasons: 1. I like the idea of some amount of intrinsic value an in the $ call offers, although it probably doesn't mean a lot with a company as volatile as TI has been and the length of time involved (call it emotional and I wouldn't disagree). 2. Between now and expiration, there is going to be a lot of ups and downs. And, a down can last a long time. Going out a ways gives recovery time if trapped. For example, Mid-year last year, TXN was rolling. I bought calls & did get 'trapped' in the tech correction of last fall. (TXN went from a high of 70+ to as low as 40) Remember that before correction, TXN was very aggressive in marketing the DSP story (still good story); Asia hadn't done what Asia did; & entire silicon sector was on a roll. Took 6 months to recover to its most recent high before this latest sag. What if recovery would have taken longer? What if I wouldn't have moved out of TXN at 63 a few weeks ago and got trapped again? The time value of the option is important to me & gives wiggle room.
For me, there isn't any way I would want to take a flyer on a deeply out of the $ call, because no matter what the story is, stock price is affected by events neither you nor I nor the company control. Nor would I want a short time frame.
All this, of course, is just my opinion, and reflects my own biases. There are perfectly sound and logical arguments for short term options, out of the $ calls, etc. You need to decide what's right for you. |
