So I was looking at some LEAPS in Goog today. Didn't have any intention to buy them, just was curious what they're going for. Jan '09 $600 leaps at about $176 dollars. Are you freaking kidding me ? Who's gonna buy at that ridiculous premium. Unless you in for a one week swing trade with some Jan'09 calls, buying these leaps is absolutely ridiculous.
I don't think 42 vol is out of control. If you want to see premium go into the GTOP Jan options. They have 400 vol.
almost half of that premium is pure cost of carry. in that sense buying this leaps is cheaper and safer than other alternative expiries. the only drawback is the possible takeover bid of the company, which would make the extrinsic value evaporate, but this a very unlikely scenario for goog.
The Jan09 forward vig on GOOG is $30, which is embedded in those calls. 42% is a sale IMO, but you're looking at the premium without any concept of vol.
Those leaps probably started trading last year in 2006 or this year in January 2007. What was GOOG at in January of 2007 and where is it now? What was that LEAP priced at then and what is it priced at now? Does not seem so stupid now does it