Hedging on 1/15/21 AAPL call

[1029384756]

I'm relatively new to options and I've purchased an AAPL 1/15/21 $140c. I thought I would learn how everything works, practice, and give myself an expiration date that wasn't too close so I had a little less risk.

The problem is that I know nothing about IV crush, and also that AAPL has been declining for 4 straight days. I'm looking for general advice I suppose on hedging my position that is now about 64% down.

Last Thursday I bought SPY 1dte puts and mitigated losses. Now I'm looking into using my current position to sell out of the money AAPL options?

Any general advice? Ride it out, hedge, sell at a huge loss?

 

[newwurldmn]

I'm relatively new to options and I've purchased an AAPL 1/15/21 $140c. I thought I would learn how everything works, practice, and give myself an expiration date that wasn't too close so I had a little less risk.

The problem is that I know nothing about IV crush, and also that AAPL has been declining for 4 straight days. I'm looking for general advice I suppose on hedging my position that is now about 64% down.

Last Thursday I bought SPY 1dte puts and mitigated losses. Now I'm looking into using my current position to sell out of the money AAPL options?

Any general advice? Ride it out, hedge, sell at a huge loss?

I’m talking my book but I think you will lose a lot on this option. You bought them at their most expensive in vol terms. Maybe the stock will rally to compensate you.

 

[Axon]

I'm relatively new to options and I've purchased an AAPL 1/15/21 $140c. I thought I would learn how everything works, practice, and give myself an expiration date that wasn't too close so I had a little less risk.

The problem is that I know nothing about IV crush, and also that AAPL has been declining for 4 straight days. I'm looking for general advice I suppose on hedging my position that is now about 64% down.

Last Thursday I bought SPY 1dte puts and mitigated losses. Now I'm looking into using my current position to sell out of the money AAPL options?

Any general advice? Ride it out, hedge, sell at a huge loss?

One possibility if you're still bullish but want to lower your break even is to sell 2 of the 140s and buy a 125 turning your call into a debit spread. This wouldn't cost you any additional premium and would significantly lower the break even. The main caveat being it's now a spread so your gains are capped should the market completely recover.

 

[1029384756]

One possibility if you're still bullish but want to lower your break even is to sell 2 of the 140s and buy a 125 turning your call into a debit spread. This wouldn't cost you any additional premium and would significantly lower the break even. The main caveat being it's now a spread so your gains are capped should the market completely recover.

Thank you! This is exactly what I was looking for. I'm VERY confused about debit spreads from all the videos and articles I've looked at and I'm worried I'll mess something up, but I believe this is the position I'll go with. I was bullish, but now I have no idea if it will recover enough to break even....

 

[yogi_trader]

Another play (Not better than above just different) if you are ready to jump in, is to sell a Nov 145 call as a hedge to reduce your debit. Best case: Apple rallies to 144.99 and the call you sold expires worthless and then stock after Nov expiration keeps on going “to the moon” for your Jan 21 call.

 

[Ayn Rand]

Did not need to go out to 2021. Truth - no one really knows what happens out there. That far out is usually for entities hedging big portfolios.

At most perhaps 2-3 weeks from expiration is enough to get a taste of how options work.

AAPL is a great stock to do options on but a year out is a bit much.

Never done out a year. What is the bid - ask spread? Any idea what the delta is?

Care to provide your thought process on why you went out that far?

 

[1029384756]

Another play (Not better than above just different) if you are ready to jump in, is to sell a Nov 145 call as a hedge to reduce your debit. Best case: Apple rallies to 144.99 and the call you sold expires worthless and then stock after Nov expiration keeps on going “to the moon” for your Jan 21 call.

I like this idea as well. While I have this thread open: is there any one on one training that anyone knows of where I could schedule an hour for like $100 and ask questions? I don't know anyone in my personal circle that is knowledgeable

 

[1029384756]

Did not need to go out to 2021. Truth - no one really knows what happens out there. That far out is usually for entities hedging big portfolios.

At most perhaps 2-3 weeks from expiration is enough to get a taste of how options work.

AAPL is a great stock to do options on but a year out is a bit much.

Never done out a year. What is the bid - ask spread? Any idea what the delta is?

Care to provide your thought process on why you went out that far?

Delta is .2298, was about .35 when I bought it. I paid $8.89 when I bought it although I don't recall the bid ask. Right now bid/ask is 3.20/3.40.

In regards to why I went out that far....I don't have a valid reason lol or not a smart one anyways. I bought an option that was far OTM and extremely close to expiration initially and lost about $400. Did some more research and the further expiration date just seemed much safer: "I have 5 months until the call expires, the time decay doesn't eat me alive quickly, and if Apple goes up I can just sell ~45 days in and make a bit of money? And if it doesn't go up and I start losing money, I have a great deal of time for it to go back up"

 

[BeautifulStranger]

I'm relatively new to options and I've purchased an AAPL 1/15/21 $140c. I thought I would learn how everything works, practice, and give myself an expiration date that wasn't too close so I had a little less risk.

The problem is that I know nothing about IV crush, and also that AAPL has been declining for 4 straight days. I'm looking for general advice I suppose on hedging my position that is now about 64% down.

Last Thursday I bought SPY 1dte puts and mitigated losses. Now I'm looking into using my current position to sell out of the money AAPL options?

Any general advice? Ride it out, hedge, sell at a huge loss?

Looked up this option. It is priced at $3.30 midpoint with a delta of .22, theta of -.03, and a 16% probability of profit. Each day AAPL must go up at least .15 for you to breakeven on theta.

Seems like the call did its job: Protected you from a big adverse move in the underlying. AAPL declined a little more than 18% from its recent peak. Even comparing a scenario where one put their entire account equity into AAPL, but without leverage, and buying at the top, they would be down 18%. Since you bought this option out of the money, it’s delta was less than .50. If we assume the option had a average delta of, say .35 throught the move and we talk into account a few days of theta and maybe an adverse move in vega and if the option position represented the equivalent shares of being long the outright dicussed above, your account would be down 7%. If your account is down this amount, or even a bit less, may I suggest you were over leveraged, especially since best practices seem to indicate several plays are better than one.

If I had a situation like this, I would use a stop of 10% of the AAPL’s daily ATR below each day’s open until I’m stopped out, next Friday’s open, or the $120.00 recent resistance area, whichever comes first to exit this position.

Linked below is an online option pricing tool that displays output in spreadsheet or graphical form for various option strategies:

https://www.optionsprofitcalculator.com/calculator/long-call.html#

 

[deltaf0rce]

I'm relatively new to options and I've purchased an AAPL 1/15/21 $140c. I thought I would learn how everything works, practice, and give myself an expiration date that wasn't too close so I had a little less risk.

The problem is that I know nothing about IV crush, and also that AAPL has been declining for 4 straight days. I'm looking for general advice I suppose on hedging my position that is now about 64% down.

Last Thursday I bought SPY 1dte puts and mitigated losses. Now I'm looking into using my current position to sell out of the money AAPL options?

Any general advice? Ride it out, hedge, sell at a huge loss?

Outside of just selling it which would be my reco, build a fly and short two 160’s and buy a 180. Now you have a fly at still relatively decent vol. takes your cost down to 1.56 , no margin tie up, 82% less Than your remaining cost, of 8.65, and would normally potentially net a potential gross 20 handle return on the spread(12.8x on your cost), but you’re legging in and already down quite a bit so it won’t be so effective on your original basis. But nonetheless a strong risk reward upgrade.

I’m curious to know what you were hoping to learn holding such a long dated option