I was going to suggest at minimum rolling up your call from 75 to 100: (-2 75/ +2 100). Michael's suggestion is better if you want to "press" it or you can do a ladder too (-2 75/+2 100/+2 105), since there are 4 more months left. Bottom line is that 75 call is prone now to whipsaw just like buying the underlying as its delta is almost 1, so it is better to take a nice profit and invest some back or take it and run.
I commend you for staying calm thru out this trade as GLD shot up ;-).
Good luck.
Murthy
On Thu, Sep 24, 2009 at 5:00 PM, mcatolico <mcatolico@mindspring.com > wrote:
Clarification. The ratio could be traded for at least your $14 credit -
hence the net overall net zero cost for those pure free long 100s
Subject: RE: [TheOptionClub.com] Quality Problem: Long D-ITM Calls
At the very least I'd consider ratcheting up the position by doing say -2
75/+4 100 ratio leaving you with twice the longs for zero debit or better. A
free ride on your bullish hunch.
-----Original Message-----
From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com ] On
Behalf Of L
Sent: Thursday, September 24, 2009 8:31 AM
To: OptionClub@yahoogroups.com
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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