Originally Posted by
tsquare
Talking about percentages when talking about buying selling calls (when compared to the underlying stock) is an apples to oranges comparison. Of course you are going to make a bigger percentage gain with the option. And.. you are correct that you can sell that option if it goes up to collect that gain. No argument there. The question is... will you? hehehehe Let's suppose that you are praying for it to hit the $13.60 in order to make money.. with the deep in the money call, your percentage gain is waaaaay bigger, but I tend to not look at percentages in options because you don't play with the same amount of money as you would if you were strictly investing in the underlying security. BTW.. I am glad you made money in AAPL options.. their premium is way to scary for me. But I do think that this is a good time to buy the underlying.. I have an order in right now.. YMMV of course
My strategy is to lock in a specific % of gains-keeps emotions out of it. I never expect nor wait for the underlying to hit the strike price + premium paid. (APPL was unique in that expiration was 2 years out and my far OTM calls quickly became ITM). I will watch this one(Jan '12 12.5s) as I am curious about the potential "recovery play" this summer. In this case, I would sell them all with a 25% gain which could be in the next month or two (my estimation). I am typically all out 4 months out (September in this example), so as to avoid premiums being quickly eroded.
BTW, a great website with a variety of strategies.
Options Strategies: Getting Started