Jeffrey, if you want to bet on Dell by buying Feb calls, I would definitely NOT buy the 90 call. If Dell is at or below 90 by expiration, you will lose 100% of your money. If I were buying Feb calls I would buy "in the money" calls, ie, those with a strike price of 75 or below. For example, if you bought the Feb 70 calls, you would pay $11.00 right now. Even if Dell was at 80 at expiration, you would still have $10 of your $11 investment. The Feb 90 calls might make you money, but short term, out of the money calls are very risky.
If I wanted to make a short term bet on Dell, I would be more inclined to buy the next month up (May). This gives you slower deterioration of the time value of the option, and gives you breathing room in case of an overall market drop.
Just my 2¢ |
