Vimal,
I appreciate your explanation, however you still haven't given the prices at which these options were bought/sold.
The reason I was specific on the prices is I wanted to see if there was a volatility crush on your July options as the earnings came out recently (usually only the front month are most affected, but you see some increase on the other months too).
Are you familiar with a roll? To capture the profit, you can roll your May 270 call to July 270 - thus making it a vertical. For this, I would need to know how much you paid for it in the first place. This roll which involves buying your May 270 back and simultaneously selling a July 270 (do it as "sell a calendar", in most brokerages) - this would fetch you about $6.77 right now and locking in a profit. THIS IS JUST ONE option to consider.
You will still hold July 260/270 vertical spread. Whether this makes sense or not is determined by what you paid.
If you don't do anything and AAPL closes above 270, then you would have at least made $10 (close both sides), which may not be necessarily bad thing. Your 260 call would have AT LEAST $10 of intrinsic value - it will have extrinsic value too ...
Let me take a wild guess here - did you recently take an Optionetics seminar?
Good luck.
Murthy
On Fri, Apr 23, 2010 at 7:46 AM, vimalbpatel@ymail.com <vimalbpatel@ymail.com > wrote:
Hi Murthy,
My thought process was like this. AAPL was about $255 and I was bullish on it. So I wanted to buy July $260 call and keep it until 30 days to expiration. I wanted to sell it if my loss is 50% before that date.
Now $270 was far away and thought I can sell May call to collect some premium. That was going to offset my option price by about 25% and was hoping it would expire wortless or premium will decay in last 30 days.
Now AAPL has moved a lot in last two days. Yesterday about $7 and today 4+. I really don't want assignment on this one so I thought I would ask you guys.
I am up good amount on my 260 call so one option is to colse the position with profit. Which is never a bad thing.
Second option is to close out this position and roll the spread to 270 July vs 280 May. Which will still give me profit.
So being in the condition I am in, what you guys will do. As I don't have much experience, I would like to see how you guys would adjust this position.
Thanks a lot,
Regards, Vimal
--- In OptionClub@yahoogroups.com , Murthy N <optionsmaya@...> wrote:
>
> Vimal,
>
> When or more importantly for what price did you buy this (diagonal
> calendar)?
>
> What was your thought process in doing this trade BEFORE you put your hard
> earned money into it.
>
> There is no risk of assignment - too much time value on the 270 calls and
> there are no dividends for AAPL.
>
> Murthy
>
>
>
>
>
> > OptionClub-unsubscr> On Fri, Apr 23, 2010 at 6:17 AM, 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
> >
> >
> >
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