If we still had April $95 calls, the plan had always been to roll them to May $95. Visa is trading up $1.10 this morning and April $95 calls are going for $0.30. These calls are up $0.10 from yesterday, while May $95 calls are up $0.35. The question you have to ask is:
- If Visa just hold the line perfectly flat here all the way through April expiration, would it be wise to sell April $95 again now at $0.30 to take advantage of Theta decay, or should I just sell May $95 calls due to Gamma risk?
Theoretically, keeping everything else constant, the models will show you the Theta decay on April vs. May $95 over next 8 days is actually relatively very close. April $95 Theta is -0.04, while May $95 is -0.03. In the end, if you sell April $95 calls now, you are really just penny pushing with significant risk that if the stock falls, April $95 calls will not nearly provide the buffer as May $95 would.
Thinking it through greeks one by one while keeping other things constant always helps and clears the picture. I will re-emphasize as I have in the past, if you don't understand greeks, you shouldn't be trading options to begin with.
With all this said, I just:
- Sold to open May $95 calls for $1.63 credit.
Now, I have June/May $95 calendar.
Good luck!
