Hedging on 1/15/21 AAPL call

[deltaf0rce]

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.

don’t do this. It’s way too long of a term To own that Vertical, It’ll tie up 3x the capital is the fly,
Your only out maybe being maybe you get in the money sooner than expected, meanwhile your payoff is less than 4:1. Not including your original basis

You have the patience to watch it for the period, so do and at least recover 85% of your remaining capital to go do something smarter
And don’t make the same mistake twice

 

[deltaf0rce]

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.

Wrong. Neuters him on a debit with no upside

 

[deltaf0rce]

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

I read the wrong series above, was looking at 9/2021 - assume the debit is 1.15 above and the payoff is almost 20:1 on the Jan fly same structure

 

[yogi_trader]

Wrong. Neuters him on a debit with no upside

No upside on a short 145 Nov 20/long Jan 21 140? There is upside along with simplicity which is a good “arb” in this situation IMO.

 

[Thor]

I'm relatively new to options and I've purchased an AAPL 1/15/21 $140c.

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

My first choice is to get out, as I don't see a bounce in a hurry.

No point in tying up money in margin till Jan by selling/hedging, there will be many opportunities to make money before that.

 

[1029384756]

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

Thanks! Just when I thought I was getting the hang of this....I bought that far out because I thought it was safer. I actually bought 4 contracts at $8.89 and figured I could hold them as a safe alternative and make more return than if I had bought shares. Basically I thought I could treat them like holding shares but increase my upside

 

[deltaf0rce]

No upside on a short 145 Nov 20/long Jan 21 140? There is upside along with simplicity which is a good “arb” in this situation IMO.

Makes no sense to leg into a diagonal now with the vol down 50%

 

[deltaf0rce]

Thanks! Just when I thought I was getting the hang of this....I bought that far out because I thought it was safer. I actually bought 4 contracts at $8.89 and figured I could hold them as a safe alternative and make more return than if I had bought shares. Basically I thought I could treat them like holding shares but increase my upside

I think I see what you did here. Well, you learned a quick lesson on vol. ...you don’t want to buy vol when vol is high. When you are long a contract you are always long vol, short time (theta)..., you got hosed here , I suggest read a couple books if you want to speculate on options

 

[1029384756]

I think I see what you did here. Well, you learned a quick lesson on vol. ...you don’t want to buy vol when vol is high. When you are long a contract you are always long vol, short time (theta)..., you got hosed here , I suggest read a couple books if you want to speculate on options

Vol is volume or volatility? I also bought on the second day of the recent drop, so it seemed I could buy at a low I didn't expect, and then sell as it increased. Will definitely be doing some more research...

 

[deltaf0rce]

Vol is volume or volatility? I also bought on the second day of the recent drop, so it seemed I could buy at a low I didn't expect, and then sell as it increased. Will definitely be doing some more research...

Volatility