Opportunity in C

Discussion in 'Options' started by ptrjon, Jan 6, 2009.

  1. ptrjon


    I only write options, I don't buy them, but if you believe Citi may move in the next week and a half, the share price is 7.47 and the Jan 6.00 call option is selling at $1.55. That's only $.08 in time value for 8 business days.

    If you're bullish on Citi, You may want to consider it. And even if the price stays the same, you'll be able to sell the option back with little shortfall. Of course if the share price dips, so will your value.

    *this is not investment advice, just pointing out a unusually low amount of time value in an option.
  2. THe stock needs about a 20% move for the 6 strike to be at the money thats a huge move so the time value looks about right given the IV these days.
  3. ptrjon



    Actually Citi would have to climb $0.08, or 1.07%, to be at the money.
  4. His point is that the $6 strike is the equivalent of a deep ITM call given the move required for that strike to be ATM from ITM and the time remaining, so thus the small time value premium on the ITM call.

    And I think you misunderstood the post when you said C has to climb .08 to be at the money. As of now, the $6 Call is ITM.
  5. ptrjon


    thanks, and my mistake. the 0.08 positive move would be the break-even point, that's what I meant.
  6. Time to time, if i am bullish or bearish in certain position and confident that they will make a big move in a short term, i always use this kind of DIM near month options, which contain almost zero extrinsic values and has about the same delta as stock, which give you the almost the same move as a long/short stocks, but obviously, if you are wrong, you are getting more trouble and loss...:D