GOOG real play - any advice?

[SuperBanda]

Hi everyone!

Few months ago, I was quite bullish on GOOG (almost when it was touching its bottom) and I went long Jan/12 calls at 460 strike for a premium of 80$.

Today, trying to lock some of the profits, I went short Jan/12 calls at 590 strike, for a premium of 81$.

Therefore I don't risk anything anymore, and my profit can range from 100$ to 13.100$ per contract.

My idea is the following:
- if GOOG keeps on running, I will buy back the calls sold today (when they will have little premium in their price) and sell new calls at a higher strike; at the same time buy puts at a lower strike;
- if GOOG goes back to where it is coming from, I will buy back the calls sold today and wait for a new advance for more call sellling.

What do you think?

 

[nazzdack]

Quote from SuperBanda:
----months ago, I was quite bullish on GOOG....
----Today, trying to lock some of the profits, I went short....
----My idea is the following......
----if GOOG keeps on running....
----if GOOG goes back to where it is coming from....
----What do you think?

1) It has some "merit".
2) You've gone from being outright long to being in a spread.
3) If you're sure about market direction, you should be in an outright position instead.
4) Offset the original position and realize a profit when all of the news looks "rosy".

 

[spindr0]

Quote from SuperBanda:

Today, trying to lock some of the profits, I went short Jan/12 calls at 590 strike, for a premium of 81$. Therefore I don't risk anything anymore, and my profit can range from 100$ to 13.100$ per contract.

Locking profit in/recovering premium for option bot by converting to a spread isn't a bad thing.

My idea is the following:
- if GOOG keeps on running, I will buy back the calls sold today (when they will have little premium in their price) and sell new calls at a higher strike; at the same time buy puts at a lower strike;

The problem with that is that you'll be buying back intrinsic value at a loss while carrying paper gains. I prefer the opposite. Lock in the gains and carry paper losses.

Taking a loss on the 590 calls (rolling) and then buying puts will undo your locked in gain potential.

- if GOOG goes back to where it is coming from, I will buy back the calls sold today and wait for a new advance for more call sellling.

To me that's a bit of a Pyrrhic victory. You worry about 55-60 delta short calls while losing on 85-90 long calls.

And then there's the issue of a lot of successful timing for your ideas to work out.

My short answer is that I would have locked in the 90 pt gain on the 460 calls by closing the position. If still bullish there are many things you could do while risking only a portion of that huge gain.