BX - Calls going into earnings

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Palindrome

Is it me or do the calls look cheap?

I just bought the November 18th calls for 0.45 25 strike.

They look cheap to me in my opinion.

Any thoughts?
 
Palindrome obviously wants someone to reinforce his buy decision and does not wish to be told otherwise.

He says the calls "look cheap"... compared to what?

All things being equal calls are priced according to the probability of the value of the stock going up. At earnings time the calls typically bear an additional burden of an increased implied volatility which will naturally decline once earnings are announced.

Is there a basis to believe that the earnings will be 'better than expected' and will cause buying in the stock thus leading to an increase in call value?

What is the basis for this 'mis-pricing' belief other than "the calls look cheap"???

According to what calculation are the calls cheap?

What is the expected value of the call after earnings announcement? Where do the probabilities used in the expected value calculation come from?

In 99.9% of cases the after earnings expected value of any call going into earnings is less than the price of the call.

Just as in roulette, the probability of picking a winning number is independent of any previous winning guess. The worst thing that can happen to a roulette player is to have an initial winning streak...it always foretells ruin.
 
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Ok...thanks for the feedback. I should make a couple bucks on this one most likely before earnings. Maybe this will be only a small win.

Do you trade options?
 
65% in two weeks, that was a great gamble. I'm going to continue to gamble, in fact my largest position is a gamble on NGVC. Started buying under 11, gambled more at 11.50, and gambled even more at 12.00. Now I have a nice Gamble on NGVC, taking it to 18 within 6 months.

Excellent Gamble to Reward.
 
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