for calendars you want to buy OTM option at a strike and sell near term option at the same strike. so the best scenerio is for the stock to hit your strike and booked the differences in the premium of the option. If it never hit your strike but trade in a range you can continue to capture the near term premium until about 3 month from the longer OTM opex, at this time you will probably want to get rid of the position because of decay will be fast.
Yes but as I have outlined selling puts, has such a limited upside that it doesn't work well when I'm quite bullish with aapl.
Just go naked short the straddle my friend, AAPL will not go further up, its overbought...trust me, I manage $200M on a daily basis. But in all seriousness, Im pretty new at this so you probably shouldn't listen to me, but I would think there's some kind of strategies where you can profit of theta whilst being bullish underlying...maybe the pros on here have some suggestion. But as said, Im probably wrong
If you're just trying to obtain linear leverage, options are an inefficient way of doing so. The best use of options is to utilize the non linear aspects of them; volatility, gamma, +ve theta if you want, etc. IOW define risks and rewards via those pesky Greeks.
I tend to think of how to protect myself first, so I would probably buy a long term vertical and leverage based on how much account risk. Let's say you think AAPL will be up by 25% by 2014 and you are willing to risk 10% of your cash. You could buy a 685 Call for $78.40 and sell a 740 Call for $60 (2014 expiration on both). This means for each vertical, you risk $18.40 per contract. Your max reward would be $5500 per contract. To meet the $10k max risk, you buy 5 contracts. If things end up beyond 740, you pocket $27500, which is a 27% return on your account. If things end up below 685, all options expire worthless and you are down 10% max.
Options give you the ability to tailor a risk graph to your liking. In general, to get something, you have to give up something -> trade offs.. So if you want to negate time decay, you have to sell some premium but more often than not, that 2nd leg may become a drag on your net. The problem with your test question is that it's ill defined. The best option strategy involves timing, direction magnitude of expected (hoped for) move and risk tolerance if wrong. If you define those better, you might find a select a more acceptable risk profile. In lieu of that, some strategies mentioned (mine and from others) will do well, some OK and some will be ungahts (g).
always buy DOTM call. the best way to avoid time decay is buy DOTM call, or simply day trade it, this minute in and that minute out. I made money on 650, 620 calls! AAPL 800 2014 call is at 47 900 2014 call is at 30 even DOTM are so expensive, only idiots will buy them. or you need short a call to reduce premium, and time delay. but when you short a call, you need a margin, that only avoid kind of time decay, you still pay too much. 47/30 correspond to a decent invidual stock price, why not just do some research, simply buy a stock (no time decay), also you can hold it infinitely. you are seeking a losing strategy in option