Re: [TheOptionClub.com] How Do I Get Out?

 

You are already at max loss. You have a chance to play the market for free when you get assigned.

I had a calendar on KO and got assigned last Thursday. (ko went ex-dividend .44 Thurs.) I was short 2400 shares in my IRA - which only had $4,000 equity. :) Course, KO dropped .44 when it went ex-dividend - and continued down. I bt to cover that morning but held my long options cause KO was recovering a little. Wound up making $2,000+ on a calendar that was down $500 on Wed. :) I'd rather be lucky than smart anyday.

----- Original Message -----
From: "Kenneth Ginsberg" <ken_ginsberg@yahoo.com>
To: <OptionClub@yahoogroups.com>
Sent: Tue, 16 Mar 2010 08:45:39 -0400
Subject: RE: [TheOptionClub.com] How Do I Get Out?

> RFH:
>
>
>
> One of the things you need to understand about calendars (actually almost
> any options position) is that the max loss typically applies only when held
> to expiration and doesn't take into account things like bid-ask spreads and
> commissions (any kind of slippage). DITM options tend to have large bid/ask
> spreads as their deltas are nearing 1. Both of your calls are DITM right
> now, and it would seem like the only way to "get out" with only your .20c
> loss would be to go to expiration with it. The risk there is early exercise
> (and you are assigned) on the Mar 56 call since I believe SPY will go
> ex-div this Friday. If it is not exercised early, then it will be exercised
> at expiration and you will probably have to tell your broker to exercise
> your long Apr 56 call as well to flatten out the position since most brokers
> will not auto exercise a call that still has a month until expiration. (If
> you are assigned on Thursday for the divvy, you would then exercise your
> long Apr call then). This all assumes you have enough margin or cash to
> sustain an exercise and assignment. If not, you probably have no choice but
> to bite the bullet and eat the additional loss.
>
>
>
> I am also just wondering why, along the way as IWM went further and further
> and further against you, you didn't adjust the calendar or just get out of
> it?
>
>
>
> Dan Sheridan has some great videos (most free I believe) on the CBOE website
> that explains calendars and how to adjust them, and if you look through this
> groups messages there may still be a video replay available of a seminar he
> did for us on calendars a few weeks ago (thanks again to Chris for making
> that happen).
>
>
>
> Hope this helps.
>
>
>
> Ken
>
>
>
>
>
> From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On
> Behalf Of RobertH
> Sent: Tuesday, March 16, 2010 12:33 AM
> To: OptionClub@yahoogroups.com
> Subject: [TheOptionClub.com] How Do I Get Out?
>
>
>
>
>
> In late February, I bought a Mar/Apr IWM call calendar at the 56 strike for
> 0.20. I paid $200 for this directional bet with IWM around 62 at the time.
> Well, the market certainly didn't go down, so I want to exit this trade. I
> was under the impression that if you bought a calendar spread, the most you
> can lose is the amount you paid. But to unwind this trade, I have to buy
> back the March call at $11.61 and sell the April call at $11.45 for an
> additional loss of 0.16. How can I get out with only a $200 loss?
>
> Thanks,
> RFH

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