Thursday, September 24, 2009

Re: [TheOptionClub.com] Quality Problem: Long D-ITM Calls

 

I thought pigs got truffles...


On Sep 24, 2009, at 12:23 PM, Paul Seifert wrote:


Bulls make money Bears make money and pigs get slaughtered.  Seriously  I would sell half my position and book the profits and then sell some slightly OTM calls to gain a little down side coverage.  Most of the experienced people I listen to advise that when you have a situation where you are uncertain is the time to take off half and book profits.
----- Original Message -----
From: L
Sent: Thursday, September 24, 2009 9:31 AM
Subject: [TheOptionClub.com] Quality Problem: Long D-ITM Calls

 

Hi - I'd love to have some help trying to make a proper adjustment to my wonderful long position. I've looked the Michael's article/PDF "Trade Adjustment Basics" and while I understand in in principle, I'm having trouble applying it to this position.

I am Long 2 Calls on the GLD at 75 Strike, Jan 2010 expire. (GVDAW) I paid around $14 for them back in Dec 2008. GLD is up around $99 now.

My outlook on GLD is bullish, but I know I could also easily be wrong and could watch my gains evaporate.

According to Michael's adjustment decision tree, I would sell OTM calls. Problem is that the the premiums at the 100 and higher strikes are so small (less than $5.00) that they do little to protect my downside. If I go further OTM, the premium becomes meaningless.

I've thought about buying a PUT at my BEP, that would be cheap at only around $1.50 or so.

Quality problem, I know, but still, I'd love to get some guidance on possible ways to proceed.

With thanks,
Lance



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