Option Trading Articles: [TheOptionClub.com] Re: MCD Calendar

Saturday, May 23, 2009

[TheOptionClub.com] Re: MCD Calendar - I deserve a break today

As a follow-up to myself, I did get lucky on this one and sold my left-over MCD 55 calls for a buck and a half on the nice rally 5/20. McDees has continued to rise sharply, but at $1.50 I accomplished my percentage goal. I have been unlucky on direction more often than not, so I have to consider myself fortunate after committing a stupid mistake.

RFH

--- In OptionClub@yahoogroups.com, "Rob Hansen" <robhansen5252@...> wrote:
>
> With 23 days to May expiration, I bought 8 May/June 55 call calendars in McDonald's Corp. for $0.83 debit. MCD was trading at $54.95. On May 4th, MCD hit a downside adjustment point, so I liquidated half of the 55 call calendar for $0.75 credit and bought 4 of the 52.5 call calendars for a debit of $0.85. Unfortunately, volatility continued lower over the life of this trade, and decreasing volatility is not what you want in a calendar spread if you want to get out early with a nice profit! Anyway, my short May 22.5 call was just over a dollar ITM as expiration approached, so I took this leg off on Thursday before expiration for a credit of $0.95. This left me with the 4 of the 55 calendars on Friday morning when MCD opened the day at $53.50. I entered a limit order to close the trade for a credit of $1.20 and must have hit the exact intraday top. My cell phone alerted me to the trade, and I tallied up a nice 16½ % gain on my initial investment (after commissions). But NOT SO FAST! I didn't look at the text message close enough, because I was only able to get 2 of the 4 spreads filled, and when I checked my account on Saturday, I found that I'm still long 2 of the June 55 calls which crashed down to $0.80 bid. (The May 55's expired worthless). Now what? Should I sit back and hope for a rally in MCD on Monday and maybe they will trade back up to $1.20? If I sell them now, I end up just shy of break even for the monthly effort after commissions. Man, that ticks me off. As Jimmy Buffet says, "But I know, it's my own damn fault."
>
> So, beginners, make sure you check your fills and not take anything for granted. Since I work during the day, I wasn't on top of the details like I should have been. I just quickly glanced at the text message and assumed that I was completely out. Thanks for allowing me to vent!
>
> RFH
>

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