William, interesting points on DELL call prems.
In my opinion, a nice play might be: purchase calls (at/near-the-money) on Monday afternoon and sell near the close on Tuesday. Historically, I've observed this to be a low-risk, profitable play. (Some folks might complain about not letting profits run beyond Tuesday.)
Here's a possible scenario that would assist the play:
* Monday has the potential of being a down day. (At a minimum, it shouldn't be a strong up day given Clock-gate.)
* Tuesday looks good for a short-term reversal (both on fundamental and technical grounds). I'd expect a swift and pronounced rise in the major indices.
* A nice rally on Tuesday could be viewed as constructive for the market, encouraging participation of "parked" cash. Companies perceived to have strong track-records should be the grandest recipients.
* Investors/traders which have been cautious (yet optimistic) may react to any upward move prior to DELL earnings -- not wishing to "miss the boat." More gasoline!
* Given the above, Tuesday's close has the potential of being at or near the highs of the day. (A slight pull-back in the final hour of trading is reasonable, but should not erase the bulk of gains.)
Someone made off with my crystal ball some time ago, so this little sketch is one man's speculation. That said, a Monday close of ~104-105.5 would not be surprising; Tuesday's gains have the potential to exceed 3-5 DELL points. The nice part about the play is that it's not implemented until/unless Monday's action has unfolded. IMO, discipline is required in three key areas:
i> avoid the play if DELL has a strong run on Monday [contrary to TA];
ii> set mental stops and commit;
iii> close the position by Tuesday's close DESPITE TEMPTATION.
For those hell-bent on holding calls past Tuesday's close, out-of-the money Aug/Sep calendar spread/s would accommodate the premium drift mentioned in #58392.
*** ONLY an OPINION. Actual mileage may vary, void where prohibited by law, federal&state taxes may apply and are the sole responsibility of participant/s. CA residents may have addtn'l benefits, including but not limited to the great outdoors.
GT,
Alan |
