Use Jan 12, 2007 MOT CALL options close price for April 07 calls
15.00 MOTDC.X 3.40
20.00 MOTDD.X 0.52
spread is 3.40-0.52 = 2.88
v.s. the 09 Jan MOT LEAP call
15.00 VMAAC.X 5.17
20.00 VMAAD.X 2.86
spread is 5.17-2.86 = 2.31 !!!
So the carry cost is much lower on the leap, with a much slower time decay.
Remember it is American-style option, the longer time and lower carry are wind in my back to win this bet...I don't have to be right at the exact time in the next 2 years, once MOT moves to 20 during that time, I can choose to close out my position with a big profit.
Also it is very important for a professional trader to hedge properly for this kind of trade...which I'll cover in my result post.
