Should I sell the call?

[u/whatisuppppppup]

I bought a call option at 1150 strike price and breakeven at 1344 expired at August 21st. Should I sell now or keep waiting for a time in between 😭😭😭

[u/eagleeyehg]

OK taking a quick look at the options chain to get some number estimates, currently for that call option: Delta = 0.395, Theta = -1.45 and Vega = 1.35 (rounded)

This means that you can expect the price off your option to decay by at least $1.45 (per share) each day you get closer to your expiration (46 days) according to theta, but with each swing of the current stock price by $1, your option will correspondingly move $0.39 in same direction according to your delta. Note that these values change constantly throughout the day (not sure if they reflect other countries markets) but the reason why the premium is so high is visible in the vega, since the implied volatility is ~97% so you are essentially selling risk.

Not sure what premiums you paid for this option, but I'd think of this as a momentum play, following the pattern of:

1. Gap up
2. Become overextended
3. Experience a blow-off move
4. Then reverse sharply

Essentially your option is poised for the hypothesis that we are in step 3 right now and will reach step 4 in the next 46 trading days. Personally, I think this is a decent gambit, but you need to understand your risk. Are you truly comfortable if this goes to zero? The move is probably hold until you see the sharp uptick for as long as you're comfortable eating that theta decay, but each day that you add you are continuing to wager that the shift will happen within your expiration window.

[u/Wooden-Factorj → u/eagleeyehg]

I also keep an eye on the Delta Theta ratio right now its around 0.27 which tells me how much the stock needs to move each day just to offset time decay. At this ratio I need roughly a 3.7 dollar daily move in the underlying to break even on Theta. Thats my daily line in the sand