I was planning on selling my Nov EPD calls today, but with the big decline, now I'm considering holding through EX and selling on the next mini rally. Anyone else holding calls through EX?
What happens to the calls at EX, do their value automatically drop by the amount of the distribution? Also, would it help to buy cheap protective puts in case the calls keep declining?
Any thoughts would be helpful, thanks.
Yes, the value of the calls will drop with ex by the amount of the delta. In other words, we are in a very bad boat, because today is the last day to sell, but EPD is down 1.5%. And I just turned negative today from when I started investing in March 2011... This feels awful.
Hoping it fills the gap left at the open today. if not, I'll probably hold the Nov. contracts and hope it pops to 54 in a couple of weeks. the div will only account for a .65 drop....
They should drop by the div amount at EX, but things could be different this time I believe because of the election and the fiscal cliff.Nobody knows, I just sold my 2nd half of EPD and the first half of CQP. I am going to maintain my discipline and continue to sell my positions, first half 2 days before EX, and 2nd half 1 day before EX. Not every trade works and I will just get ready for my next one. I feel if I played the positions properly and maintained my discipline, its time to move on. Best of luck to all of you.
options prices do not follow xdiv prices except for itm puts.
you might think you can sell your itm calls in epd today and buy them back on monday for sixty cents less. They are likely to stay the same. I attempted this with MTGE this June and got mildly burned. The ones I did not sell, covered that and more after a couple weeks. ReikReik calls that a reacharound, when an equity pays off after xdiv. In epd my 50's paid off but my 52.50's have lost so much value I am willing to gamble them to earnings.
EPD reports earnings next week. They could be the best managed MLP out there. Since their revs are fairly isolated from the vagaries of barrel pricing, I would look for increased earnings and outlook. they did partner with enbridge to reverse the seaway pipeline out of Cushing to the Gulf. This will have a positive impact starting mid third Q. It has led to a stabilizing of mid continent crude as well.
Now, MLPs are supposed to be low beta, but the in and out sector rotation of late makes them very risky this year. Even with the positive GDP suprise this morning, we have another selloff.
Like a true believer who is determined to follow illusion in the face of contrary evidence, the market is determined to act in fear.
Kudos to Xion for the heads up closeout when epd hit 55.
I'm down 80% on my EPD calls, so I have nothing to lose by holding after ex. Who knows, we might see a nice pop if earnings is good.
I'm a lot more worried about CQP, which for me is a much larger position. If CQP doesn't go up, then I might have to resort to robbing banks.
I kcuffin sold AGNC calls that were rising in sept to buy itm CQP itm calls that evaporated. It will take several conservative plays to regain that loss. Still up for the year and gambling on ACAS next week. Then cash for the election. Maybe a strangle if the price is right.
I sold the rest of my EPD Dec $50's today. Sold the first half yesterday. The overall play turned out ~break-even.
It's too bad I wasn't more disciplined about selling part of the position on the prior weeks' mid-to-high $54 opportunities. The distance to ex-div and corresponding hope of additional gains stayed my hand at the time. That's a lesson I hope to benefit from in future trades.
I am happy I stuck with at least some discipline though and forced myself to sell half my position yesterday even though it didn't "feel good" at the time (it was well after the day's highs). Now in retrospect of course, even yesterday's lows were great prices vs. having to settle for a lot less today.
Anyways, I'm thankful I lost a gain vs. losing principal, I know others haven't fared as well. I'll keep my fingers crossed for you.