Selling shares in exchange for getting long with options
Anyone else looking to trade out of shares and into options? Tough because both shares and options are substantially higher after past few weeks. Looking to sell enough puts to equal current position in shares, and start picking up out of the money calls. By selling my shares, if we somehow get a disaster, my risk is the same as holding on to my current shares, however when it pops, i ll keep the put premium sold, and get bigger upside from calls. Anyone have similar thoughts? Wish i had been in options only from start.
I have been trying to tell you guys for a month now to take the options route. Back when the stock was trading at $4 I took significant positions with three options:
April $8 calls
April $3 puts
April $2 puts
Obviously there has been quite a run up and a lot of pumping so I would expect this week a bit of a correction and trade around $5 going into the results. I have no intention of holding these positions 48 hours after results are announced. If it fails, then all the other Pali trials I feel face an uphill battle and everything else they have in pipe is years away plus they will need to recapitalize, so going down to around 1.50 would not shock me. But even if it goes to three bucks I will get out immediately to retain time value and volatility.
On the other hand if results are positive, they now have 3 or 4 other Pali trials that will need to at least get partially priced in, partnership opportunities become very likely and will get partially priced in. I could easily see this go from 5 to 15 in a couple of days, but If it does I suspect there will be a gap that needs to be filled do it will settle around 10.
I hope for patients sakes this passes with flying colors and my calls make 6000% but by taking these positions I don't have to care about the results and as long as there is a significant movement one way or another I will make several hundred percent.
If I was going to initiate this position for the first time right now I would have a mix of 8 and 10 calls and 2 and 3 puts. Good luck.
Best to stick with stock unless you surround the trade (then paying too much now); if get a temporary fall from lackluster data, price could fall and maybe stay low, and you lose all your money in options, but not so with stock, because you only lose (or win) when you sell. You could win in options if the price does move to $8 or $10 or higher, but a safer bet with stock.
My question, and i dont have a large position, about 5% of my account, is that instead of holding my long shares through the runup, or drop, dont i risk the same loss if i sell all shares and sell a similar amount of say $5 puts? Im looking at april 5$ puts that are pricey enough. If ziop tanks, i buy shares at $5, which is exactly where i am now, and if i also purchase the 7,8, 10$ calls i get much more upside for the same $ risk. Am i misunderstanding something about the options market?