Friday, April 23, 2010

Re: [TheOptionClub.com] Re: What would you do?

 

Becki,
 
When you do a cash secured put, you need to have "secured"  in your account the amount of capital needed to purchased the stock if assigned.  For example sell  1 XYZ 25 put .  The amount of capital in your account would be 2,500.00.
 
Cedric

On Fri, Apr 23, 2010 at 1:00 PM, Becki Kain <anaisdog@yahoo.com> wrote:
 

You keep mentioning " cash secured put"s.  I know what a put is, what makes one "cash secured"?  thanks



--- On Fri, 4/23/10, TheOptionClub <chris@theoptionclub.com> wrote:

From: TheOptionClub <chris@theoptionclub.com>
Subject: [TheOptionClub.com] Re: What would you do?
To: OptionClub@yahoogroups.com
Date: Friday, April 23, 2010, 10:50 AM

 

Well, this is a first....

We usually get the post from the guy who's trade has blown up and they
want to know how to save themselves from the pain of loss. Here's a
trade that worked!

What you need to do is sit down and crunch the numbers so that you can
make a decision as to whether it makes sense to roll those calls up and
out a month. You have a profitable trade, so the real trick here is not
to do something to make a mess of it. Barring that, you're in a good
position on a good stock.

A few thoughts...

Time value is greatest at-the-money. AAPL is trading at $270, which is
where you sold your call. If you buy it back you are buying all of that
time value back. I tend to leave things alone on covered calls when the
stock is trading at-the-money. If the stock moves higher then a couple
weeks before expiration I start looking at what rolling does for me.

If you're assigned on the call you'll realize a maximum profit. If you
like owning AAPL, you might pick a price level where you like owning it
and consider selling a cash secured put or a put vertical with the idea
of accepting assignment should AAPL pull back.

Lastly, consider whether collaring the stock makes sense at some point.
AAPL has been on a tear and eventually will consolidate. A collar can
provide a nice way of protecting some of those unrealized profits.

Good luck!

Christopher Smith
TheOptionClub. com

--- In OptionClub@yahoogro ups.com, "vimalbpatel@ ..." <vimalbpatel@ ...>


wrote:
>
> Hey guys,
>
> Very new to options so here is the problem.
>
> I bought AAPL July $260 call couple of weeks ago and sold $270 May
against it. Now price is approaching $270.
>
> What would you do right now as AAPL is $269 premarket right now. Would
you wait two more weeks before you buy back or roll over strike? Or you
would buy back right now?
>
> Did you get assigned three+ weeks before expiration? Because
eventhough price is at strike, option is still made of extrinsic value
and has yet to get any intrinsic value.
>
> Thanks in advance,
>
> Vimal
>





--
Make it a great day!

Cedric Wynn

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