This is a news alert about $SHOP. I get the gist of it (someone's buying calls because they think it will go up bigly) but why would someone buy calls @ $85 when it's already @ $127?
"SHOP May 85 calls are seeing interest with the underlying stock up 7% (volume: 40.0K, open int: 40.5K, implied vol: ~74%, prev day implied vol: 61%). 40K traded in a single transaction. Co is expected to report earnings mid-May."
Can someone translate this into layman's terms?
byu/PFCCThrowayay instocks
Posted by PFCCThrowayay
5 Comments
You buy deep in the money calls for a few advantages such as they are less affected by theta decay and less prone to wild fluctuations when the stock trades up/down.
You’re just seeing one side of a trade. They could have multiple legs, or this could be a hedge for a short position, or etc…
Congrats!
today is the day you learn about DITM LEAPS
I do this quite often. I will buy deep ITM calls to not have to pay so much in TIme Value. For example the SHOP $85 12/15/2028 Calls are going for around $70 at the close. So that is $70 + $85 – $127.41 = $27.59 of time value. Which means SHOP will have to go up $27.59 to get to $155/shr to breakeven.
Whereas if I bought $125 12/15/2028 Calls the current price is around $53 (almost all Time Value). And if I hold to expiration then SHOP would have to go up t0 $178/shr ($125 + $53) to breakeven.
Bro just copy paste the body of your post into your favorite AI chat.