2010 Option Question

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    Posted: 03 February 2009 02:20 PM #16

    SNIPUS - 29 January 2009 08:56 PM

    Got a bunch of 2011 120 calls and am short just a few Jan 2010 120’s and used the cash to buy gold mining shares ( GG)

    Last I heard Tommo was in the Alps drinking schnapps with some wartime refugees

    I’ve been long AAPL since Dec ‘04 and have been adding throughout the recession.  I just recently became interested in options and have been looking into the ‘11 LEAPS because I see them as essentially the same investment as common stock, but without the upfront $$.

    Can someone describe in more detail the thought process behind buying those ‘11 options?  When someone enters into those positions, are they targeting a sell date of around 6 mo - 1 yr?  Or are they viewed similar to common stock and most would sell the options whenever they “get their price”?

    I have enjoyed lurking here the last few months - what a great source of knowledge and insight!

         
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    Posted: 03 February 2009 04:37 PM #17

    Its the same as stock but more cautious.

    The option value drops over time.

    Stick with the 2011 LEAPS.  If you believe that Apple stock will be 200 in January 2011, then your 2011 LEAP strike price should be 150 at most. 

    Then sell in winter 2009-2010.

         
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    Posted: 03 February 2009 05:20 PM #18

    Tetrachloride - 03 February 2009 08:37 PM

    Its the same as stock but more cautious.

    The option value drops over time.

    Stick with the 2011 LEAPS.  If you believe that Apple stock will be 200 in January 2011, then your 2011 LEAP strike price should be 150 at most. 

    Then sell in winter 2009-2010.

    Thanks for the reply Tetra…

    Is there a “quick and dirty” way to compare the relative values of the different 2011 strike prices?  For example, if I have a 2-year price target of $160 for AAPL, then would it make more sense to buy the $100 strikes at $24, or say, the $125 strikes at $15?  I would be in the money at around $130 on the 100’s, and $140 on the 125’s.  Is it a rule of thumb to buy the highest strike price that you think will be in the money in the future, so as to reduce your up-front cost?

         
  • Posted: 03 February 2009 06:58 PM #19

    I don’t think it is a good time to buy 2011 options just yet.  I would wait till you know aapl is going up before buying in.  Options lose money over time when aapl is either moving down or going sideways.  Wait till you see aapl confirms an up move first.  The 2011 have lost a lot of premium in the recent months.

    Edit:  corrected way to wait.

    [ Edited: 03 February 2009 10:37 PM by alice ]      
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    Posted: 03 February 2009 09:36 PM #20

    I was coming to find some hope for my 2010. Thank you very much.
    Could someone remove the term genius from my ID.

    [ Edited: 03 February 2009 09:39 PM by Tullio ]      
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    Posted: 04 February 2009 10:52 AM #21

    From the action this morning, I think 2010 is a better bet. Who knows! The sky could be falling in 2011.

         
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    Posted: 05 February 2009 11:10 AM #22

    Tullio - 04 February 2009 01:36 AM

    Could someone remove the term genius from my ID.

    The term “Mac Genius” is a classification based on the number of your posts. So I guess it is not easy to remove it, probably the only way would be to let the board administrator rename all those classifications.
    But you can change it to “Apple Fellow” by reaching the next limit of 1000 posts. :wink:

         
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    Posted: 05 February 2009 01:46 PM #23

    alice - 03 February 2009 10:58 PM

    I don’t think it is a good time to buy 2011 options just yet.  I would wait till you know aapl is going up before buying in.  Options lose money over time when aapl is either moving down or going sideways.  Wait till you see aapl confirms an up move first.  The 2011 have lost a lot of premium in the recent months.

    Edit:  corrected way to wait.

    By the time a “confirmed up move” has happened, will the price of those 2011’s be prohibitively expensive?  The 100’s are up $2 in 3 days…

    If I’m a long-term investor by nature, should I even bother getting involved in LEAPS in the first place?  I’m just trying to expand my investing knowledge, and figure out whether the best way to capitalize on my 1-3 yr bullishness is via Options or Common Stock.

         
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    Posted: 05 February 2009 02:14 PM #24

    dc930,

    You can replace shares with LEAPS in 1:1 ratio, keeping the cash somewhere safe or use LEAPS as a leverage ie. own more in shares equivalent.  The former is to reduce risk while the latter is to go for the brass ring.  If you think AAPL is about to start a multi-year rally, go for LEAPS ... if you think rally is going to be explosive, go for the latter.  If you think market would be moderately up, sideways and down over the next 1-2 years, get out of LEAPS quick.

    Edit:  OT:  Anyone hear of the institute of the feeble mind?  Long long into the future, humans can learn any skills through a hypothesizing system like what is shown in matrix.  Humans are classified into different grade of geniuses.  Those who can’t be classified are thrown into the institute of feeble minds who would learn the old fashioned way i.e. principles and concepts.  These feeble minds would design new programs for the hypothesizing system.

    [ Edited: 05 February 2009 02:20 PM by Mace ]

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