question about an 110 call

Discussion in 'Options' started by devilfishlane, Apr 12, 2010.

  1. I am holding a single(April) 1180 call with 3 days left in the trade. Its up around $1125. If I wait, another day or two and the market stays at this level, will the call continue to increase in value ?
  2. no
  3. Thanks. But will it drop if it stays at these level as it gets closer to expiration? (melt like an icecube so to speak)
  4. Depends on what kind of premium buyers will give, right?

    Think of it like this - you have an option to buy at 110. If the Friday price is 110, then the option is worth..... zero, to my thinking. Agree?

    If Friday's price is 115, then the option is NOT worth 5$ either. There would be zero difference to the buyer if he just went out and bought at 115.

    The buyer of an option will want to bank some savings for his trouble, right? How much is a 110 option, with a 115 price really worth?

    Again, depends on market direction. If it "looks" like a strong bull market is in the cards then the total "should" be closer to the 115 total price (110 for buying the stock plus 5 for the option). Iffy market will give lower price for the option, etc.

    IOW, there's no set premium until the close on Friday.

    So what's the lesson?

    Set a price target and live with the fact that you may not get the maximum gain, but remember that you also didn't get slaughtered by holding until the close Friday to try and get that last nickel, only to have the price tank a dollar....
  5. MTE


    Your post is a bit inconsistent. In the title you mention a 110 call and then in the text you talk about 1180 call. So I'm going to assume you are talking about SPX Apr 1180 call, which was 18.10 bid at 19.60 at yesterday's close. SPX was 1196.48. So the call has 16.48 in intrinsic value and about 2.37 of time value (calculated from the mid point). If the market stays flat then the option would continue to lose these 2.37 in time value and come expiration you will be left with 16.48.