It doesn't matter when you bought/sold them. What matters is the capital you have at risk! If you buy stock, if it goes up you make money and if it goes down, you lose - simple and obvious. However, in options there are other ways you can get hurt, which as Chris mentioned is theta decay and as Michael mentioned in a separate thread, with theta comes vega (volatility risk).
Don't get me wrong and I am happy for you - but you got lucky. Your statements make we a little "worried" as they are a cause for concern. You are only thinking about upside and not about the downside. Have you thought what would happen if AAPL closes at 260 or below in July? Your break-even is $755 and everyday your long call is losing $8 because of theta decay.
The current value of your spread is $12.53 each.
You didn't think AAPL would go to $270, but now that it is there, you think it is going to go higher ... see a trend :-).
Ok - my guess about you taking an Optionetics course was wrong - so you are already ahead :-).
Murthy
On Fri, Apr 23, 2010 at 9:01 AM, vimalbpatel@ymail.com <vimalbpatel@ymail.com > wrote:
Hi Murthy,
The reason I did not give exact price is that I did not buy and sell calls as a same order.
$260 call was bought for $1010 few days before I sold May $270 call for $255.
So If I were to close the position, I would make some money but not as much as I would if AAPL closes around 270. Now as Chris said, AAPL can consolidate a little and that will make 270 call go down as premium will decay much faster in next few days.
The reason I don't want to sell July 270 call is I don't have much experience in options and if AAPL keeps going up, it will make me unhappy as July expiration is far away.
In case AAPL goes above 275 then I would rather roll strike up say buy July $270/280 call and sell May $280/290 call to offset some price.
What do you think about this?
Thanks a lot for your replies. No I didn't attend optionetics seminar. They are really expensive for my taste. I did read Options Course though.
> 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@... <
> vimalbpatel@...> 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
> > >
> > >
> > >
> > >
> > >
> > > 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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