Could you please explain why you have switched over to the April calls? Does something happen to January calls when options expire this week? Do they suddenly fall in price? (December 13, 2000)
December expiration will come on Friday (technically Saturday). On Monday we will be in the January expiration period. At that point, the heat lamp really turns up on January options and their value starts melting faster. For new positions at this point we want to look out to February, March and April to give us more of a time cushion if the stock does not perform as we want right away. Between Friday and Monday, all things remaining equal, option prices for January will lose value. If your option is at the money, it will be one of the most volatile, and if the stock starts racing up, the option will move well. The problem is, the more time that slips by, the time loss eats away at the premium, i.e., the value of the option that is out of the money. Ultimately the option will only be worth however much the option is in the money. We like to buy time to give us some cushion, but that cushion starts to flatten out the closer we get to expiration. The last thirty days are the most damaging to an option's time value.
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