CRM rises after earnings 80% of the time. It is that 20% of the time that the shorts have been patiently waiting for.
I am going to wait until Friday to see what I need to do with this month's short puts.
I do have an order ready to execute to sell 500 short if the stock bounces up to 133.50 or higher today or tomorrow. That 133 area is the underside of both the 50 and 20 day exponential moving averages.
We all know that this stock is grossly overvalued but that doesn't matter until it matters.
If CRM drops a lot after earnings, your May puts will be great. If the stock is pretty stable on Friday, your puts will lose money. I bought and sold a small put position this morning. They were June puts, but I chose to close them out with a small profit only. I also re-shorted and covered a little stock, but I am holding stock short going into earnings. If the stock doesn't drop immediately, then time won't be my enemy because if the shares don't drop right away they will drop soon.
Ignore takeover rumors. They are planted on multiple sites. There's an insistent poster on the FFIV site. That doesn't bother me for a number of reasons, including the fact that I covered (and made money on) 105 FFIV puts yesterday and I'm not short FFIV now after trading a little to the downside recently. If this rumor affects the stock, it could be interesting for buying puts. Those puts wouldn't be subject to an earnings report move this week.
CRM is likely to be down a few points by the end of this week, but over a day or two, it's hard to stop manipulation. Be careful with options on this stock. Compared to other stocks, the puts are overpriced, IMHO.
what happen on the day of expiration if you own a put and the share price is now less than the target price. if i bought may 120 puts at 1.8 and on friday crm is trading at 115 and the put is now 5.5 do i need to do anything or will the put get exeercised automatically?
Gert, why buy the puts? If you're right and the stock goes to 115 your 2000 short position picks up another 13 points of $26K. If you're wrong and the stock goes to 120 and stops, you're out $3600 (assuming you buy 20 contracts). If you want protection, buy the out of the money calls so that if the stock goes to 135-140 after earnings, you're protected to the upside.
Even if you bought the puts and the stock went to 115, you'd just sell the puts and pocket the gain and probably cover the short position at the same time. It would be a win win, but why take the risk to pay that extra premium knowing that if the stock doesn't drop more than 5% you just threw away that money?
ALL WANTS TO be covered no later than 114/112
best to pass on the gravy and cover around 120 THIS round
THEN WAIT for bounce to 128 ish TO SEE WHAT chart looks like
THERE IS an odd formation in this issue CAN'T READ IT LOWER THAN 112 MAX AT THIS TIME.
what does ir mean when u 500 short with 5 May 125 puts written against the position
i understand that you have shorted 500 shares and if the price of the stock goes down you make money. what i dont understand is when you write puts against the position. how do you make money? thanks trying to learn options
I shorted 500 shares in the 134.60 area. When the stock dipped to 129-130 I sold 5 May 125 puts for a net credit of just over $2000 (I got 4+ for the options). I now have to wait to see how this trade works out. I am giving someone the right to put the stock to me at 125. Well I shorted at 134.60ish and I got 4+ points for the puts. If the stock is below 125 on Friday's close, the stock will be put to me at 125 closing my short position that was initiated at 134.60ish. So I make about 9 points on the short and 4+ on the put premium or about 13 points in less than a month. If it doesn't close below 125 on Friday (which I hope it doesn't) then I keep the 4+ points from the option premium and I continue to stay short and I can sell the June puts if that's what I decide to do.
I was short 1500 shares coming into today's trading. I shorted all positions above 134. I decided to write puts on 1000 shares. So I sold 5 May 130 puts for 4+ and 5 May 125 puts at 4+. I didn't do it on the same day and I didn't short all 1500 on the same day either. I scaled into all trades. I decided to keep 500 short just to trade.
I know this stock like the back of my hand. I was on the long side about 80 points ago and I've been on the short side off and on for the past 6 months. My fear is that I'll be right about the stock going down but lose an opportunity to cash in on a big drop because I decided to hedge by selling covered puts on the stock. This is really no different that buying the stock and selling calls against the position. As a matter of fact it is just the opposite.
So, earnings come out on Friday. I'll go into the day with 1000 short and 5 May 130 puts and 5 May 125 puts written (sold) against the position. If earnings are really good (and you know they will be), the stock should close above 130 and the options will expire worthless and I'll keep the premiums that I received and still be short 1000 shares.
What if earnings are good but the stock goes down big? Well, I will roll the options and I'll roll down $5 on each strike price. So I'll buy back the May 130s which will have zero time premium on them and sell the June 125s for an amount above what I pay for the May 130s and if the stock is below 125, I'll but back the May 125s with zero time premium and sell the June 120 puts for another net credit. I'll build another potential profit of $5000 into the equation (I have 1000 short and I'm lowering my option strike prices by 5 points on each strike price). Then I get to sweat it out until the third Friday of June to see where I stand.
One thing is for sure...Marc Benioff will come on to Mad Money on Friday or Thursday evening and he will use the following superlatives, FABULOUS, UNBELIEVABLE, FANTASTIC, PARABOLIC and Buh Buh Buh BOOOOOYAH!!!!