"Does anyone have any feeling on the Feb calls? Is it a prudent
speculation to buy the 95s? Premium is currently 1.562."
how "prudent" the move might be, is certainly an open question, since
time erosion will become more and more a factor as you approach expiration. but here is something to consider:
if you buy the 95s in quantity, a decent profit can be had.
for example...
let's say you purchase 50 contracts of the Dell Feb. 95s (DLQBS) at the price you mentioned, "1.562" ea.
that's 50x1.562x100=$7810 invested.
a one point move in the option itself is a $5000 gain.
50x2.562x100=$12,810.
or similarly, a 1/2 point gain in the option brings a $2500 profit.
but any multiple of contracts would show a like return.
20 contracts, a $2000 return on a one point move.
10 contracts, a $1000 return on a one point move...etc.
in this wager, whether or not Dell's stock price actually reaches
95 is not an issue. your primary concern would be the movement in the
option.
this approach works in both directions of course, and you could lose
5 grand very quickly if the option loses a point, and you sell.
but considering the moment, and the likelihood that Dell will deliver,
in some fashion, the risk here can certainly be worth the reward.
i'm holding Dell Feb. 90s and 95s, and AOL 185s, under this scenario.
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