2 HUGE reasons longer duration option contracts (1+ year) are better than short duration contacts (1 month)
1. The number one thing that moves the price of a stock in the long term is what the EPS does. If you give a company 1 month to "boost EPS" they can't do it. If you give them 1 or 2 years, they likely can. So buying a good company at a good price & giving them time to boost EPS will likely result in a higher share price in 1 or 2 years. (Also why selling longer duration portfolio secured puts is a MAJOR HACK!)
2. I only make bullish plays on undervalued companies. If I make a 1 month play, it's very unlikely the company will "snap back" to intrinsic value in a month. If I do a longer contract (1+ year) there is more time for the company to revert back to the mean line of EPS.
So the combo of these 2 things results in a double bullish tailwind that you just don't get with short duration contacts...
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2 HUGE reasons longer duration option contracts (1+ year) are better than short duration contacts (1 month)
1. The number one thing that moves the price of a stock in the long term is what the EPS does. If you give a company 1 month to "boost EPS" they can't do it. If you give them 1 or 2 years, they likely can. So buying a good company at a good price & giving them time to boost EPS will likely result in a higher share price in 1 or 2 years. (Also why selling longer duration portfolio secured puts is a MAJOR HACK!)
2. I only make bullish plays on undervalued companies. If I make a 1 month play, it's very unlikely the company will "snap back" to intrinsic value in a month. If I do a longer contract (1+ year) there is more time for the company to revert back to the mean line of EPS.
So the combo of these 2 things results in a double bullish tailwind that you just don't get with short duration contacts...