I bought 20 390 DEC puts at 2 and 100 350 dec put at .35 This is my first trade in options. Where do i go from here. Can some give me a good strategy when to cover this trade? Thanks
>>>pappy, whats your take now?<<<
I wrote a small number of Dec 440 calls last week. I put an order to cover today at $2.65 for a good gain, but it didn't quite execute. The IV is up now due to the big move today, I guess -- so I may just let them expire. I really can't see the stock recovering before OE.
Other than that, I don't have a strong opinion. It wouldn't surprise me at all if the stock ends next week 20 points in either direction. But generally, I think we are close to equilibrium, with most big buyers having short-term price thresholds between 360 (30 x 2007 EPS) and 420 (35 x 2007 EPS).
Sell 40 put contracts of Goog december strike 370 for $1.40 per contract.
You create a butterfly, in this way you got your money back and also you have a good chance to make a lot of money.
After december expiration go to this link for an ideea what to do with the money.
Dude, he said this was his FIRST TRADE - i.e., he probablly doesn't know much about complex options strategies like the rest of us, and his broker will probablly not allow him spread trading immediately either.
I would sell your Dec 350 @ $.50. You will get a little bump over night in the morning. Your Dec 390 at $6.00. I would not hold on to your 350's very long.....They are far enough out of the money which will cause them to go down very fast with both time and change in market sentiment. The 390's you can hold on to for a little longer but I would sell them by days end tommorow.
If you have a general feeling that goog will drop further, get into Jan 06 or Mar 06 contracts after you sell. The leverage of the Dec contracts are tempting but can decay to nothing very quickly.
Sounds good, sheyryar. One point I left out is that by selling the 380s (instead of 1/2 of the 390s) you largely neutralize the effects of time decay (the 380s actually decay at a faster rate, relatively speaking, than the 390s).
Time decay is your greatest foe right now.
Thanks all. I will take half of 390 out and leave 350. This will give me my initial investment back and then i can play with profit. IF lucky enough 350 puts will give me nice profit.
If that didn't make any sense, try this:
Another alternative, if you are quite confident that the stock will hit 385 before OE, is to hold the 390s and sell an equal number of the 380s. By doing so, you lock in a small profit and leave yourself the chance to earn another $1000/contract (if Google is 380 or below at OE; or $500/contract at 385, etc.). Lots of upside and you still sleep pretty well.
Another alternative, if you are quite confident that the stock will hit 385 before OE, is to sell hold the 390s and sell an equal number of the 380s. By doing so, you lock in a small profit and leave yourself the chance to earn another $1000/contract (if Google is 380 or below at OE; or $500/contract at 385, etc.). Lots of upside and you still sleep pretty well.