I'm curious to hear some feedback from other option traders about non-obvious reasons for buying call options that are NTM (near the money) and expire in 6 months or later. One obvious reason that I can think of is that the buyer is bullish on the stock and wants to benefit from any gains, but does not want to put up the capital to buy the stock outright (or wants leverage). Makes sense with expensive stocks like AAPL and GOOG...but is that the only reason? And more importantly, if you, as the buyer of the option, are willing to wait it out like that, then why buy NTM options when you could go for an OTM strike that's a few bucks over the market price and pay a much lower premium? On the flipside of this - why would a call writer selling these options want to bind themselves to a stock for 6-12 months for that one-time premium? I mean, if you do a call for AAPL that expires in 2015 you can get an $80+ premium per share, which is $8K+ per contract - but you have essentially 100% chance of it being ITM and you're bound for over a year. I can kinda see why someone would buy this call, but not seeing the motivation for selling it - it just seems like a really bad deal across the board for the seller. What am I missing here?
You don't know what else there are doing. Yes some people use ITM or NTM options as a stock equivalent. Usually if they are doing that they will buy deeper ITM since there will be less theta loss. Buying an OTM call option is all time premium so usually not a good trade...you are totally betting on one direction and will make squat if it doesn't go strongly in your direction. If you buy ITM then you actually have more bang for your buck so to speak...if the stock moves slowly to the upside then you will have some premium left. However again you don't know if they are selling the near month call against it. Usually thats the case, it reduces the cost of the option over time (rolling)