My Linn Energy trade is not working that well at this point in time. I am still bullish on the stock but my positions are underwater (the weighted-average cost is about $1.25 per share). My recent financial analysis showed that the company can weather a 50% drop in operating cash flows for about a year or longer. However, the stock is now a victim of the macro environment: oil is down; markets have been having a really bad time since the start of the year. Accordingly, the stock is down 29% YTD: (Source: Google Finance) If you are still bullish like me, here is a trade for you: buy January 2017 calls with a strike of $1.50. This instrument currently costs about 17 cents apiece: (Source: Yahoo Finance) I ran the numbers quickly to see what the IV and the Greeks for this one are: (Source: Option-price.com) There are a few things I would like to point out with these options. First, you have to realize that you are risking losing 100% of your investment, if you go long with calls on Linn Energy. The good news is that it is really cheap in absolute terms - the minimum trade is going to cost around $17, fees excluded (a minimum size of 100 contract). You can also use it to insure your short positions. I tried to find a cheaper version with similar strikes but they are more expensive in terms of implied volatility (a key factor in options pricing). Secondly, the option is really volatile in the short-term due to the Greeks (Delta and Gamma, in particular). For example, a $1 move in the underlying in either direction will cause the option to either go worthless or make a 200%+ gain. In addition, beware of the option's Vega, which is a measure of its sensitivity to changes in implied volatility, which is currently relatively high. A drop in implied volatility, which is likely, if the stock starts rising, will be a headwind to the gains from Delta. On the other hand, if the stock keeps going down, IV will rise, causing the option to lose less in value due to the offsetting effect of its Vega. In short, options are not as straightforward as people might think. This is why I am betting on longer periods of time and evaluating the likelihood of the underlying reaching the strike price. Thirdly, the company will be posting Q4 results on February 17. Volatility is likely going to increase before this date. Hence, if you go long with the options today and they gain in value before the date, I recommend selling them before the earnings release. Typically, volatility drops on the earnings date which causes options to lose value temporarily (remember Vega?). In addition, options writers usually sell a lot of contracts on such dates. This creates a demand-supply issue, and options get pressured. On the other hand, investors can utilize this knowledge to buy puts or calls on this date or shortly after and save money, increasing expected returns simultaneously. What do you think of this trade?