LogFAQs > #952969779

So I mean, here's the thing with buying calls like that, you have to have a conservative estimate of where you expect the price to go after earnings

So say a stock is at $80 and you expect earnings will push it to $85. Instinctively you're like "oh well I'll buy the $85 call for end of week!" right? Well, no. You need to consider contract price. Say the contract is $2 a pop. That $2 is coming straight off your profit margin, so really, you need to buy the $83 call. BUT thats just breaking you even, so really, you need to buy the $82 or $81 call, which will be even pricier than the $83 call and further eat into your profits, to make money.

So I mean there are plays to be made, but picking the price isn't entirely intuitive even if your thoughts on the stock are solid.

And of course you could always be wrong. Then be prepared to lose 80% of your investment rather than 10%, which is why you need to keep your stakes low.

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No problem!
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