DELL options
Amein,
I am not an options guru. I know only enough to make me dangerous, and to increase my tax burden. Here's a stab at your question:
I am holding August 105 and 120 call options, I read somewhere that as the expiration day approaches, the value drops... so, if one is expecting a split announcement, when would be a good time to close the position...good price anytime or with earnings report which leaves only two days to expiration...
a) options do lose time value rapidly during the final days prior to expiry: I believe about 1/8 per day. However, that is rather insignificant if the underlying equity (DELL) is capable of making a 5-point move on any day.
b) it looks to me as if you are making a mistake commonly made by both options and equity traders. You are so concentrated on making the last 1/8 of a point, trying to get in at the bottom and out at the top, that you lose sight of your objective: get a decent return on your money. I would be a wealthy man today if I hadn't tried to shave 1/8 (or even 1/16th) of a point on some of my trades. When you bought the options, what did you consider to be a reasonable return?
c) I don't know what the stock will do after the earnings announcement: it will depend on what the announcement is, whether a split is announced, and what the overall market is doing. My advice: decide on a reasonable profit, take it, and move on to the next trade. Another possibility is to take your profit on a portion of your position, and let the rest ride, if you think the price will continue up.
Good luck and good trading,
DELLish, 3. |
