Buy the weekly / June 125 call calender (sell the weekly, buy the June) for $1.80
I will give him his prices, after hours this calender shows B/A 2.00/2.16 .. think they should check their prices closer to closing than pricing this out in the morning. there is a dollar difference on each of these strikes now and you would pay about 20% more than what mike is quoting.. regardless, lets drive on. mike correctly comments that options near term are pricier and will decay faster. also says historical move is 3% vs what options are implying now a 5% move. My first assumption is that the options market usually gets the moves pretty much right, so at first glance i think his strike selection is too low, i would go with the 130 strike. second i think that there is no need to use the June strike. main thing with calenders is getting the direction of the move correct.. if the trade is right it is right right away.. that weekly call will decay big time regardless of whether you buy the may or june call. i would buy the may 125 for mikes example, that brings the cost down almost 50%.. might get that calender for .95 at open, allowing you to buy twice as many lots if you have a certain dollar amount budgeted
IV for May weekly 125 is 60
IV for May 125 is 34
IV for June 125 is 28
plugging this info into the Trademonster analyse tab... mikes calender, assuming a move to exactly 125 shows a 30% gain. A weekly/may 125 calender shows a 60% gain
using my 130 strike alternative, weekly / May calender for .64 ish.. a move to 130 (thats about a 5% move that options are implying) shows a 148% gain the next day.
mikes trade will be a good winner if Visa just barely moves up..even less than the 3% historical move he quoted. if you had to use the 125 strikes, i would make it a weekly / may calender but first choice would be a move to 130 from the expected double whammy of mastercard earnings and then visa earnings
