Help with Options

Discussion in 'Options' started by monkey771, Oct 9, 2005.

  1. Hi, I want to buy dna and aa before they report earnings but the price is so high that I cannot buy the shares of both of those stocks. I want to buy options. But I dont know which ones to buy. Will someone please be kind enough to help me on this? I want to buy call options on DNA and AA at 1 pm on monday and sell at 1 pm the next day. And I want to get as much points as i can with the options. I know that most options do not move 1 to 1 with the underlying security, but I would like to buy the option chain that will move 1 to 1 if indeed dna and aa gap up on tuesday. I know I have to buy a call, but what strike price, and what expiration month? Should i buy in the money, at the money, or deep in the money? Please help.

    If someone can give me the option symbol that i should buy, i would be very thankful.

  2. hajimow


    Your posting might not encourage people to respond because it is so basic and it also depends what you want to do and where you think those stocks are going. Do you want to invest or gamble?
    Anyway I suggest to buy 22.5 for aa and 80 for dna. If you are so sure that they will gap up, you can also sell put 20 for aa and 75 for dna. Safer side will be to buy calls for November but riskier and more profitable ones will be October ones.
  3. Hi, thank u very much for replying. Actually i thought the question was very straight forward.

    I just need to buy CALL options on dna and aa on monday at 1pm and sell on tuesday at 1pm. Now, what is the best option to buy, in order to take advantage of a 1 to 1 move in the price of the underlying security.

    I see that you recommend 80 for dna, but i heard buying at 70 strike is better for a 1 to 1 move. In other words I want the option price to move up $1 if the stock goes up $1.

    I want to buy the option on monday and sell tuesday, do u really think i need to buy a november call?

    I am not looking to exercise the option. Because of lack of capital, I am trying to trade with options based on my belief of dna and aa earnings. I just want to buy the option and then close it out, thats all.

    for ex. lets say dna gaps up 5 points on tuesday, which option symbol should i buy to capture the full gain?

    thanks a lot
  4. also, i am not trying to sell puts. I believe it is going up and i want to buy call options.

    that is the simplest way i can put it:(
  5. 1) Front month (OCT) options are more liquid than back month options, so limit orders are more likely to get filled without paying the full spread.

    2) The short answer to your question, is that the DNA OCT 70 or 75 calls, and AA OCT 20 calls are what you're looking for here.
    However, I'd suggest you acquire basic knowledge of the greeks before putting on any kind of serious size in options plays.

  6. At you can look over the chains, and click on any individual option to see the Delta.

    When you say you want the call to go up 1 to 1 with the underlying, this means you want as high a delta as possible.

    A delta of 1.00, means the option will go up 1 to 1 with the stock. A delta of 0.82 (Like in the DNA OCT 75 calls) means that you'd capture over 82% of the move if you're right. <b>Over</b> 82%, because as the stock price moves higher, so does the delta of in the money calls.
  7. Rearden, thank you very much. I understand very clearly. But there is still much more to learn.

    thank u again.
  8. Well, looks like you made a good decision...
    As long as you went deep in the money with your calls....
    Which you probably did...
    Hopefully you did not act on insider information :) j/k
  9. hajimow


    Congratulations for your picks. My hat off to you. Today was a bad day for me.