about the time value

there are many books about options play, one guy call Alan M, and his books are the best as i understand.

make it simple, when the stock is fluctuating a lot, the time value will go up. a few days ago, AAPL sharply drop and then raised, the fluctuation pushed the time value up. in the last 1-3 days, AAPL price is quite flat, which pushed down the time value. therefore, both call/put will go down.

As time value is not that easy to estimate, yes, in some cases, short call/put is more reasonable. For example, when you see the USO has strong support of $30, and you are not sure whether USO will be up, or be flat, you can then short USO put $29. That way, if the USO flat or up, you can make money; if the USO down, so long it will not reach $29, it will expire, thus, you can still make some money or at least, not losing money. The risk of shorting option is: if the direction is very wrong, say, USO down to $27, the loss is unlimited.

hope this helps.

 

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• 回复：about the time value -Newstudent9- ♀ (165 bytes) () 01/31/2013 postreply 21:41:48