Friday, September 25, 2009

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

 

But this will also increase your time decay loss in the event the market goes sideways (or down?) for a while.
So one could sell some front month calls against them as well as rolling them up.

Ross

----- Original Message -----
Sent: Thursday, September 24, 2009 4:33 PM
Subject: Re: [TheOptionClub.com] Quality Problem: Long D-ITM Calls

 

Why reduce your position size when you can roll both calls up? This would allow you to reduce your risk more than selling half the position as suggested. And, you still own two contracts. I'd look at the selling the 75 calls and buying the 87 calls of the same month. Should be able to pocket around $11. Doing this at the same time, as if entering a vertical spread, usually helps reduce the trade expense (only pay one spread vs. two). You can reduce your trade risk from the  original $14 down to just $3. Wether you want to buy puts or sell calls after that, will depend on your short term outlook.


-----Original Message-----
From: Paul Seifert <paulseifert@ comcast.net>
To: OptionClub@yahoogro ups.com
Sent: Thu, Sep 24, 2009 12:23 pm
Subject: Re: [TheOptionClub. com] Quality Problem: Long D-ITM Calls

 
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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