>>i own may 160 calls at an average of $8.00<<
Samuel -
I'm sorry, but you may be SOL here! Why did you buy 160 calls, let alone a May expiration(AOOEL)? I hope when you say you own 500 you mean 5 contracts and not 500. At this point since the stock has fallen so much, your premium is substantially eroded (2 3/8 up 7/8). At least today it was up. I'm not for doing so, but you should have cost averaged down when AOL finally turned around today and closed on the highs. Right now, an offhand calculation I would say the stock would have to reach about 165 for you to break even. The premium will not come back as fast even if the stock moves up significantly. Personally, you should hold them close to expiration if the stock keeps going up. I doubt if you will get your 8 bucks back, but the stock may get to 145-150 by May 22. Or 'be a man' and take your loss know. It's a gamble so close to expiration. Remember as time goes by your 2 3/8 premium will erode fairly quickly. Also, as far a I know, there is no way to 'roll them into' the next month. Option contracts have a fixed expiration. From my experience if you want to play options, and for a very volatile stock like AOL, buy deep in the money options - calls or puts. You will pay more, but you wont be paying much for the premium and you will get dollar to dollar movement with the stock. If possible buy several months out, unless you're playing an earnings hunch or know something. In the end it's always better to sell an option covered against the stock than buying them. You'll probably cover at about $4, and the guy who sold them to you will pocket the $4 premium. Easy money. Good luck!!! |
