Comments on: Why Option Buyers Pay More for In-The-Money Strikes https://www.thebluecollarinvestor.com/why-option-buyers-pay-more-for-in-the-money-strikes/ Learn how to invest by selling stock options. Sat, 26 Aug 2017 14:58:57 +0000 hourly 1 By: spindr0 https://www.thebluecollarinvestor.com/why-option-buyers-pay-more-for-in-the-money-strikes/#comment-123151 Sat, 26 Aug 2017 14:58:57 +0000 http://www.thebluecollarinvestor.com/?p=15816#comment-123151 In reply to Roni.

Justin,

My option positions are variations of bull/bear collars and spreads and they’re mostly in the in gold and oil stocks which tend to have some volatility.

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By: spindr0 https://www.thebluecollarinvestor.com/why-option-buyers-pay-more-for-in-the-money-strikes/#comment-123149 Sat, 26 Aug 2017 14:54:46 +0000 http://www.thebluecollarinvestor.com/?p=15816#comment-123149 In reply to Justin P..

Justin,

Re: EDU … With no news, either someone is unloading shares pending some news or short sellers have targeted the company. Chinese stocks are often targeted.

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By: spindr0 https://www.thebluecollarinvestor.com/why-option-buyers-pay-more-for-in-the-money-strikes/#comment-123145 Sat, 26 Aug 2017 14:22:39 +0000 http://www.thebluecollarinvestor.com/?p=15816#comment-123145 In reply to Dan.

Dan,

The call buyer can exercise his call anytime he wants though it makes no sense for him to do so if there is any time premium remaining because he can realize more by selling the option in the option market.

Early assignment often occurs when the call is ITM and trading near its intrinsic value and before a dividend. All options one cent ITM at expiration will be exercised though the owner of the option can execute a “Do Not Exercise” order with his broker.

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By: Roni https://www.thebluecollarinvestor.com/why-option-buyers-pay-more-for-in-the-money-strikes/#comment-123143 Sat, 26 Aug 2017 14:15:08 +0000 http://www.thebluecollarinvestor.com/?p=15816#comment-123143 In reply to Justin P..

Justin,

I only invest in American companies because they are strictly
regulated by US laws.

Chinese companies are not transparent.

Roni

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By: Justin P. https://www.thebluecollarinvestor.com/why-option-buyers-pay-more-for-in-the-money-strikes/#comment-123133 Sat, 26 Aug 2017 13:37:39 +0000 http://www.thebluecollarinvestor.com/?p=15816#comment-123133 In reply to Roni.

No probs Spin, only doing CC’s currently myself. Do you have any positions on this month yourself?

Justin

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By: spindr0 https://www.thebluecollarinvestor.com/why-option-buyers-pay-more-for-in-the-money-strikes/#comment-122983 Fri, 25 Aug 2017 22:35:47 +0000 http://www.thebluecollarinvestor.com/?p=15816#comment-122983 In reply to Jay.

“But most of the time it is wiser to set a stop loss and get out unless you have a long horizon and patience”

Jay,

How do you spell G-A-P? :->0

It takes a very disciplined trader/investor to cut losses. Most people tend to be afflicted with Breakevenitis.

Spin

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By: spindr0 https://www.thebluecollarinvestor.com/why-option-buyers-pay-more-for-in-the-money-strikes/#comment-122982 Fri, 25 Aug 2017 22:31:28 +0000 http://www.thebluecollarinvestor.com/?p=15816#comment-122982 In reply to Roni.

Justin P.

Buying a straddle or strangle on PANW would have done quite nicely given how much it moved after the past 3 ERs. However, implied volatility of such stocks skyrockets before the ER and you are swimming upstream as you face two obstacles:

1) One side of the straddle is going to lose if the stock moves in the other direction

2) Both sides are going to lose a lot of value because of the sharp IV contraction (mid 80’s down to 30-40)

An ATM straddle for next week could lose up to 2/3 of its value because of these two factors and depending on how fast the IV contracts, it might take a 10-12 point move for it to break even. No problem, given the past 3 ERs but a big one if it goes nowhere.

Don’t let me influence your approach. Just be aware what you are dealing with.

Spin

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