Trading calls on a strong stock

Discussion in 'Options' started by J-Law, Mar 26, 2012.

  1. J-Law


    FOSL - on 52 week highs today. Chances are stock will go higher. If I was looking to trade the June calls is it even worth to the spread them against higher strikes?
    What's the best way to play the continued upside in this or any strong stock?


  2. magicz


    are you doing OTM, ITM, DITM?

    and what is your risk reward ratio do you want?

    I would do weeklies on this one anything can happen in 3 months. it does a 5+ point dump every week and recovers. Use this to your advantage. do a spread 5 points below the previous week high, this is a good find i'll watch it for a while too.
  3. J-Law


    Thanks for feedback. Looking into trade. Have never traded weekly expirations before.
    Worth a shot when opp presents. & I guess the spread can only be 1 strike or 5 points apart?
  4. J-Law


    Also not seeing weekly expirations on this stock. IB earliest expiration is April 20th.
  5. Well if you have a strong directional bias, don't cap your profits with a spread- especially if you're trading a couple months out.

    If it is this month, I'd spread it in that case- if it's at 52 weeks high and you believe on some kind of resistance developing, I'd even dare to fly it hoping it screws around in that spot and take a profit a week or two from now well before expo.

    It's worked for me before... just depends on where you see volatility going. That's key. That's the gist of trading options.
  6. magicz


  7. magicz


    looks like now we know why the move up been so nice its going to be added to the sp500 soon. index fund are scooping this up and will drive it higher in the short term.
  8. FOSL has some wider spreads, but if you don't want to limit your upside yet not get killed if it plummets and can work them a bit, you could try a call ratio backspread.

    For example, the June 135 is trading at 8.6 / 9.0 and the June 145 is 4.8 / 5.0, so you put the trade on for a debit of about 1.4.

    Your worst case is if FOSL just sits there over the next 3 months, but that doesn't seem to be a very common occurrence when you take a look at the chart over the last two years.

    I just threw those strikes out and expiration out there as an example. Personally, I like to try and get as close to a credit as possible when I put on one of these, but that might be difficult for this particular stock.

    Anyway, just a thought.