november call options too risky?

T

trc4949

hey all,

I been thinking about loading up on the X (US steel)

November 40 calls

they are about .95 each


My take is that US steel could get to 40 within the next 10 trading days and these could be worth about 4.00 each.

Am I thinking this through correct?

Do you guys ever play options that only have 10 days left till expiration.

Lets say in 5 days we are still not above the 40 level, does that mean the price would suffer huge time decay? I think the answer to that question is yes.

But what if either on the day of expiration or a day or two before, we trade at or above 40 (1 to 3 bucks above) will they be priced in the 1 to 3 range ?

Thanks in Advance.
 
It looks to me like X, along with the indicies have entered congestion from a downtrend and usually prices exit congestion in the same direction that they entered, which in this case would be down. So I think that it is more likely that X will see 30 before 40. But of cource take what I say as well as what everyone else says with a grain of salt, since none of us know anything for sure and I could be completely wrong.
 
My take is that US steel could get to 40 within the next 10 trading days and these could be worth about 4.00 each. Am I thinking this through correct?
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The only way that those calls could be worth $4 each would be if X rises a lot really soon (maybe $43+ on Monday) or you get a huge jump in IV (or some combination of both). It's not likely to happen.

Do you guys ever play options that only have 10 days left till expiration?
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Only if you understand that it's like a night at the track.

Lets say in 5 days we are still not above the 40 level, does that mean the price would suffer huge time decay? I think the answer to that question is yes.
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Depends on what you mean by huge. If no movement, maybe 40-50% decay. If X is near 40, you'll have a good profit.

But what if either on the day of expiration or a day or two before, we trade at or above 40 (1 to 3 bucks above) will they be priced in the 1 to 3 range ?
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Near expiration, if your call is above 40, it will trade near parity (stock price less strike price).
 
1) Consider doing a bull-call spread instead. The 30/35, 30/40 or 35/40 could be good. The spread can offset some of the time decay that will happen. It can also offset volatility decay that's likely to happen on an upmove in the stock.
2) The December or January 40-calls may be better for doing a "January Effect" trade. Leave the November-40's alone. :cool:
 
Quote from nazzdack:

1) Consider doing a bull-call spread instead. The 30/35, 30/40 or 35/40 could be good. The spread can offset some of the time decay that will happen. It can also offset volatility decay that's likely to happen on an upmove in the stock.
2) The December or January 40-calls may be better for doing a "January Effect" trade. Leave the November-40's alone. :cool:
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I 100% Agree.
 
I have been trading the options on X for awhile, but never going long calls. X jumping another 12% from what looks to be today's open? It's already up about 8% from Friday's close.

Theta will kill you this close to opex.
 
Quote from trc4949:

hey all,

I been thinking about loading up on the X (US steel)

November 40 calls

they are about .95 each


My take is that US steel could get to 40 within the next 10 trading days and these could be worth about 4.00 each.

Am I thinking this through correct?

Do you guys ever play options that only have 10 days left till expiration.

Lets say in 5 days we are still not above the 40 level, does that mean the price would suffer huge time decay? I think the answer to that question is yes.

But what if either on the day of expiration or a day or two before, we trade at or above 40 (1 to 3 bucks above) will they be priced in the 1 to 3 range ?

Thanks in Advance.
More...
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Well,TR49;
There is more open interest on the long side[$40 calls,NOV];
than any other, so sure i would consider it, as you did.

But when looking at trends, look at any and all trends you can;
it[x] is in the lower range of its price, year to date,
thats bearish

SPY, DIA, QQQQ are bearish & in bear markets, not good for X;
even though X is below 50 dma, bearish again,
but it may have made a double bottom.

If you are wanting to do a counter trend, & it may work here ;
US Steel survived crash of 1929,
$0.95 per january call looks better than NOV........
 
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