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Strategies & Market Trends : Ask Vendit Off-Topic Questions -- Ignore unavailable to you. Want to Upgrade?

To: Gush who wrote (3850)	1/14/2005 1:27:20 AM
From: Walkingshadow	Read Replies (1) \| Respond to of 8752

But it seems to me you will have to see quite a rally in AAPL just to break even, given the exponential decay of time value so close to expiry. Granted, most of the time value of all the January contracts is already evaporated, but for deep out of the money contracts, the time value will constitute a greater relative proportion of total value. So, that puts you at a severe disadvantage, because any increase in intrinsic value (due to rally of the underlying) is not as steeply curvilinear as that of time value decay at this point in the contract life, and this discrepancy of the two rates should be greater for deep out of the money contracts, compared to at the money contracts, right? So my question is why you picked a strike of 85 (which is unlikely to get approached by the underlying by expiry), instead of a strike closer to the money, say 75 or even 80? It seems to me if the underlying got even a bit in the money, you would profit much more than if your contracts remain deep out of the money. T