Am i a moron or these Rimm Jan14 15$ call options are really cheap ?!! Any other ideas for deep OTM options for Jan14 expiry ?
They are 100% OTM with 18 months to go, I would stay away from them. If you want cheap options buy QQQ.
QQQ hmmm i am thinking more aggressive , huge swing , thinking AA , HPQ , FB , will appreciate any ideas in that area its more like a punt than a rational trade , thanks .
Tail events can not be predicted and therefore mean that options pricing could never price in extreme moves... Therefore... If you model companies that are most likely to pop you could spread into ratio backspreds or just buy puts way otm with very small amounts of money... Ie Sell 1 otm put for 1 dollar Buy 2 otm puts at a lower strike for. 50 cents... Max loss difference between the strikes only if the stock expires right at the bought strike.. This is a bleed slow strategy because usually your either taking a slight credit or paying a slight debit plus commissions to put these trades on with a very very low sucess rate.. Meaning most of the time if not what seems all the time you lose a very small amount of money... Its a neutral gamma position market makers use to sell wings... Its a long volatility strategy... Anyone can correct me if i'm wrong.. Best stratigy in the world for tail events.. You can constantly expose yourself long to tail events.. Recently i've been thinking about the opportunity cost related to these positions.. Say for example.. A five wide ratio costs very little to put on.. But it does have a 500 dollar margin requirement... So therefore you can't put many of these trades on because each one is locking 5 bills up.. Soooo there for if i go for example way out of the money on a company like lknd or pcln in hopes that technology will change or some relization of the true value of these stocks comes about... Priceline has so many risks to me.. Google keeps baby stepping into the business.. So anyway.. You buy puts instead of ratios for anywhere from. 20 to. 50 cents.. Meaning you could literally put on anywheres from 10 to 25 trades per ratio... Pretty girl stocks get ugly and go kerplunk quick.. IE netflix cmg etc.. I've seen options go from. 50 to 50 bucks in two days.. That makes up for alot of time bleeding! I would love to hear what you guys think about this..
Surprise, A few thoughts. First of all, I hate to get stuck with a trade for that long term in any event - I mean if RIMM fell to say $4, you'd probably still hold those options and they'd probably end up expiring anyway, but you would use up alot of time waiting and hoping. If there is some reason you expect RIMM to do good soon, you might consider a nearer the money Jan 13 - there $10 strikes are only about $50. Also, when an option is so much over the current price, and there is even a remote possibility the company could get bought out, I would also be careful - if RIMM got taken out for say $14, your $15 strikes would pretty much be wiped out. On the other hand, ATM call holders would do good, share holders would do good, etc, etc. JJacksET4