Assume on May 1 you are considering a stock with three different expiration dates for the 60 call options. The percentage of the speculative premium for each date is as follows:
May....... 2.8%
August....... 6.7
November....... 10.9
Each contract expires at 11:59 p.m. Eastern time on the Saturday immediately following the third Friday of the expiration month. For purposes of this problem, assume the May option has 21 days to run, the August option has 112 days, and the November option has 203 days.
a. Compute the percentage speculative premium per day for each of the three dates.
b. From the viewpoint of a call option purchaser, which expiration date appears most attractive (all else being equal)?
c. From the viewpoint of a call option writer, which expiration date appears most attractive (all else being equal)?