@El OchoCinco it is a real trade, if it was paper money I would've put on 500 contracts which I have in the past. I decided to short FB today knowing the bad news, I will not be surprised if it goes as low as $165 before Friday.
First Option Trade
- Thread starter Crude Man
- Start date
I am new to options so should not give you advice. Here are some observations.
It is unusual for someone new to options to start a first trade going long, especially long puts. You must have a reason to start with that position. Unless I understand your reasoning, it is difficult to give you an opinion.
If you calculate the probability and expectancy, your chance of making a profit at expiry is quite low, so you must have something else in mind, or knowledge I do not have to put on such a position?
Anyway, a directional bet like that means you have an opinion on the magnitude, direction and timing of FB that is counter to the opinion of your counter party, who is willing to take the trade because he/she believed you were wrong. If your counter party is a MM, he/she hedged and make money off the hedge and bid/ask.
My non professional mom and pop retail opinion: Don't hold til expiry, exit if you meet your target, whatever that is.
Good luck.
It is unusual for someone new to options to start a first trade going long, especially long puts. You must have a reason to start with that position. Unless I understand your reasoning, it is difficult to give you an opinion.
If you calculate the probability and expectancy, your chance of making a profit at expiry is quite low, so you must have something else in mind, or knowledge I do not have to put on such a position?
Anyway, a directional bet like that means you have an opinion on the magnitude, direction and timing of FB that is counter to the opinion of your counter party, who is willing to take the trade because he/she believed you were wrong. If your counter party is a MM, he/she hedged and make money off the hedge and bid/ask.
My non professional mom and pop retail opinion: Don't hold til expiry, exit if you meet your target, whatever that is.
Good luck.
And it is also possible that FB could be at 165 on Friday, and you'll be looking at less profit than at this moment. Decay will begin moving rapidly, and if the VIX flattens or pulls back, your position will be further impacted.
Such are the vagaries of long options, which you can only experience by being in the position. There are always many headwinds to face.
And while it generally isn't a good idea just to take profits quickly, in a case like today, which comes along very infrequently, there is nothing wrong with banking a 50% gain.
@ironchef thank you. it was a simple bet that FB falls on the Cambridge Analytica news - I am a short bettor on futures mostly because I like the velocity of it going down rather than a commodity trickling up. I will not hold until expiration because I know of the decay. Thank you for your input.
@lindq First and Last option trade I ever make, lol. Too many variable to consider, if I had just shorted NQ today which I would've if not for messing around with FB, I would be a happy man.
So true. You learn quickly. And got paid doing it. A good day for you.
What newbies often fail to realize is the massive impact of volatility on an open options position. Today, you were on the right side of both the instrument and the market. And now you can probably also imagine if the reverse had occurred and your position was cut in half in a matter of hours.
So, it is one thing to say, well, I'll just open this trade and hold until expiration. But the actual experience of watching the various winds of fate hit a position from day to day, is another thing entirely.
As for me, and I second your conclusion, I'd much rather make a bet on the underlying or a relative index.
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FYI
- The option expires on April 20.
- From your post it looks like you are mixing up the year with the day.
You might consider selling just 16 of 20 in the morning, and then selling 2 each of the
FB Apr20 $162.50s and the FB Apr20 $157.50s. You'd end up with a sweet butterfly
[-2 +4 -2] with which you might get a lot of (cheap and relatively low risk) lessons, as time burns on.....
But yeah: with today's drop in FB?? GTFO.
FB Apr20 $162.50s and the FB Apr20 $157.50s. You'd end up with a sweet butterfly
[-2 +4 -2] with which you might get a lot of (cheap and relatively low risk) lessons, as time burns on.....
But yeah: with today's drop in FB?? GTFO.
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Are you still in this trade?
- 20 contracts (FB April20 160 Puts) bought at $1.36.
- Current bid about $9.10.
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No sir!
All out before market close on the same day
I coulda shoulda held on but it was my first option trade and took the relatively nice profit when it presented itself. What would my trade be valued at today, if I had held on?
Many thanks.