The Motley Fool Discussion Boards

Previous Page

Real-Money Stock Picks / Jim Royal


Subject:  Re: Am I thinking correctly here - ROKU options? Date:  7/17/2019  6:49 AM
Author:  rtichy Number:  4690 of 5107

Yeah, Vince, a couple points:

• you're running a calendar spread on ROKU, and if you let it close out, it'll be done with you sitting in cash, with full freedom to allocate the capital again.
• you paid some pretty large Time Value (TV) on the 2021 long side, even if you were deep in the money.
• selling the July 2019 and then rolling was your plan all along... and by rolling and selling repeatedly you hope to get back the TV you paid for on the long side and to reduce your effective cost basis in the 2021 long position?

So what has changed that would make you stop that plan?

• ROKU has become a name with a bit of a target on its back. (Google search shows which financial press is already discussing it.) A buyout could come at a price much higher than any short term call you might sell; when that happens, it's probably the last calendar spread position for you. After that there will be a lid on the ROKU share price, making it hard to sell it again.

You're right up against the end of the current TV on your calendar call right now; tomorrow and Friday are the right days to do this again, obviously. With the talks of a buyout, sell to a short timeframe (2 months, max?) and maybe you'll get to do it again. Aug/Sep market activity seems sluggish many years, I think you might be able to sell a call that doesn't need rolling, and then set up another one...
Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us