The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Options - You Make the Call

URL:  https://boards.fool.com/i-still-dont-fully-understand-time-value-31685058.aspx

Subject:  I still don't fully understand time value Date:  3/26/2015  12:34 AM
Author:  Demotage Number:  11036 of 11357

...apparently.

So in January, I bought 500 shares of MHR at $3.21, and sold 5 Jan 16 $3.50 calls for 0.44 each. I understand that there is no intrinsic value to the calls because the strike is above the share price. All the value is time value. Since purchase, the stock price has gone down to $2.78, but the call price has risen to $0.60

So the stock price has gone down 13%, there is less time before expiration of the call, yet its time value has risen 27%? Shouldn't the time value go down (or at least stay the same this far out from expiration)in a case like this? I don't get it.

I'm not worried about the trade. Either the calls will expire worthless in January and I'll make $220 bucks or the stock will be called away, also at a modest profit.

I'm just thinking about other options trades, and I want to understand what I'm doing. ...and I still apparently don't fully understand time value yet.
Copyright 1996-2022 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us