RE: Short the Jan 31 1945 Calls @ $9
- Any update on how you handled this tough situation?
- You would be under great pressure to close the short position as soon as possible, but AMZN's trading action was the opposite you would have liked.
- The calls traded from about $100 down to $60 throughout the day.
- Ideally you would want to buy back at the low - but you don't have the benefit of hindsight and don't know when the low-of-the-day will be.
Very tough call you had to make today.
IMO ..... You would have to close when the market opened - you can't take the chance of AMZN going up.
Thanks everyone for your input. I've been traveling this past week so I'm only getting around to updating this thread. And the fact that I had to catch a plane late morning last Friday while trying to check markets, AMZN stock price, input orders, etc. made it less than ideal trying to manage this position.
So I hear most of you who advised me to just close out the positions and reset for a possible new trade. It was either closing it out or rolling out the short Jan 31 C1945. I decided to roll, and it obviously wasn't easy given the 10%+ gap up in the stock that morning and trying to make my flight. Anyways, I managed to roll it for flat to Feb 21 C1970's, so now I have a Feb 21 C1910-C1970 vertical that cost me about $46 with max profit at $14. Of course, the whole market tanked that afternoon while I was on my flight but what can you do...
I realize what my downside risk is if the whole market or AMZN tanks before expiry, but part of my thinking is that if the stock drops below my short strike at $1970 and stays above my long strike at $1910 on Feb 21, I have the choice to take assignment and then start a campaign of writing covered calls against my long stock to make some income until my stock is exercised away at some point. This assumes the whole market and AMZN doesn't complete crater such that writing covered calls would be akin to picking up dimes in front of a steamroller, but underlying all of this is that AMZN reported such a fundamentally strong quarter that I'm bullish on the stock.
In hindsight, what I should've done or also have done, as some of you pointed out, was to have written some puts last Friday or earlier this week regardless of whether I closed out my initial trade or not. Also, in highsight, I obviously shouldn't have sold the Jan 31 C1945, or I should've picked a higher strike, which would've made the roll easier. But I sell these short dated options frequently during earnings season to take advantage of the elevated vols.
