I don't understand why the exchanges haven't created a
February series sooner, although I'm sure they have their
reasons. Maybe someone here can provide an answer?
I decided against the Aprils, because I think we have a tech
correction ahead between February and April, and do not want
to hold long calls through a correction, when I intend to buy.
But the Januaries are very inflated right now (with out of the money premium), and are subject to ever deflating deltas, i.e. even though the stock rises 5 points, you might only get 2 points on the options later in the month (if out of the money, in the monies will be 1:1). And any weakness in the stock, and those January options premiums will shrink at a rate that will make your knees buckle if your holding the long calls.
I don't know if you remember Dell's last earnings, but there was
huge open interest around the money strikes, and the premiums were
tremendous. Dell came in over estimates, but below the whisper,
and those options were instantly halved the next day. That is the
danger of inflated premiums, and is incredibly risky. A lot of
people got screwed on that one, and Dell stock hasn't been the same
since.
February options will weather temporary weakness much better on
the delta and premium, so as soon as possible I'm out of the
January and into February, fully intending to unwind the second we
have no more good news to look forward to or the market begins to
erode. |
