Gudivada04
Bewarse Legend Username: Gudivada04
Post Number: 44521 Registered: 09-2004
Rating: N/A Votes: 0 | Posted on Thursday, September 03, 2020 - 7:58 pm: | |
Bignole:
here is my rationale: to buy 100 shares of aaple it would have cost me $12,100. I bought $70 call for Jan expiry at $52.5 (i.e., $5,250 per call) which means I paid $150 in premium for time. lets say, the stock drops to $70 by January, I will exercise the option and buy 100 shares. If the stock goes up to say $140 for example, then my call will be worth $70 (I will get $7,000 when I sell). that is 33% gain. if I bought 100 shares by spending $12,100 the same $140 sell price gives me 15.7% gain. Deep in the money call is very capital efficient. Of course downside is that you should be willing to exercise and hold in case it drops.. |