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I Gambled on RIMM, Now What?
- Thread starter JTG
- Start date
You admit that it's a gamble.
So unwind it and take a profit and move on to the next trade.
If you what to play with it (since you have nothing better to do) watch the pre market if it goes against you short the stock and then unwind both positions once the market opens.
Remember today is expiration and people will start to take profits over the next two weeks as well.
So unwind it and take a profit and move on to the next trade.
If you what to play with it (since you have nothing better to do) watch the pre market if it goes against you short the stock and then unwind both positions once the market opens.
Remember today is expiration and people will start to take profits over the next two weeks as well.
First, answer this: What typically happens wrt implied volatility in a situation like RIMM this morning?
Quote from dhpar:
but you CAN'T unwind this trade AH!
on the rest; are you sane? what is complicated on trading the underlying when you trade options?
do you trade for living of for institution? anybody trading for living would take some money off the table righ away.
let's say RIMM trades at 71 AH. you pretty much know from top of your head what is the delta of your 10 jan 65 calls. say that after decent earnings you are comfortable with taking half of the position off the table and sell 300 shares. so you now have 3 (synthetic) puts and 7 calls instead. there are some good reasons why 10 options like that after the gap is better than simply 10 calls.
when the market opens you can choose several ways to trade out of it by combination of options AND stock. if the stock corrected back to 65 you at least made 1.8k with few hundreds lost on options.
your idea of trying to get out on the open for high vol AND high AH price is not a trading strategy. it is like putting bids at 10% discount and hoping that the mess of the upcoming open will fill you...
the advice of selling half after not filled immediately on market open is "strange" to say the least - you will almost certainly get whipsawed most of the time, i.e. sell very low.
note: if you want to play vol only then you should not have 10 naked calls to start with. the trade OP did is a delta trade - not a vol trade! that's where the most of P&L comes from and therefore that's how you primarily have to manage it.
You should wait for the options to go through rotation or you will have not get a good price. It takes 5 - 15 minutes for them to price. Unless you think they are priced in your favor, then you can unload them.
Quote from talontrading:
First, answer this: What typically happens wrt implied volatility in a situation like RIMM this morning?
ok. i spent my time with your idiotic advise only because your handle is old - but now i see the time was wasted because you even can't read english.
everybody knows what happens to vol - but that's not the point here. the fact that someone decides to play earnings means that the vol decrease must be incorporated in risk/reward before the trade is taken. there is nothing you can do with it after the earnings. and most importantly vol is of second order here anyway - you seem not to get it.
out.
Jan vol was 1/3 of Dec.
When you have a big option gain from an after hours EA, you have two issues to deal with.
The first is a reverse in the underlying prior to the opening of option trading the next morning. If your concern is locking in some of that gain, you hedge the position with stock. To do this in less than a haphazard way, you need to estimate the delta of your position and short shares for whatever portion you wish to lock in.
Yes, this makes the position more complex. Yes, It may cost you some money if RIMM moves up more (opportunity loss). But AFAIK, the last thing I'd want to do is see a large gain turn into a small gain before you even have a chance to close the options (RIMM drops big time before 9:30 AM).
The second issue is the obvious one that many have mentioned. IV is going to collapse in the AM. If it's big time right at the open and gets back to normal levels, you might hang in there if you're still bullish. If it drops but not down to normal levels, your best exit is ASAP since throughout the AM, IV is likely to drop more. Doing nothing is going to cost you money. The only reason to absorb that loss is if RIMM is moving up and your position is gaining in value.
If your bet is that RIMM goes higher, none of this matters. If you want to lock in and maximize the current gain, it does.
The first is a reverse in the underlying prior to the opening of option trading the next morning. If your concern is locking in some of that gain, you hedge the position with stock. To do this in less than a haphazard way, you need to estimate the delta of your position and short shares for whatever portion you wish to lock in.
Yes, this makes the position more complex. Yes, It may cost you some money if RIMM moves up more (opportunity loss). But AFAIK, the last thing I'd want to do is see a large gain turn into a small gain before you even have a chance to close the options (RIMM drops big time before 9:30 AM).
The second issue is the obvious one that many have mentioned. IV is going to collapse in the AM. If it's big time right at the open and gets back to normal levels, you might hang in there if you're still bullish. If it drops but not down to normal levels, your best exit is ASAP since throughout the AM, IV is likely to drop more. Doing nothing is going to cost you money. The only reason to absorb that loss is if RIMM is moving up and your position is gaining in value.
If your bet is that RIMM goes higher, none of this matters. If you want to lock in and maximize the current gain, it does.
I would sell half and play with the house's money, but that's just the poker player in me.
I'm new to trading, but the one thing that I've read over and over again is don't get greedy.
What were your expectations? How much did you think you would make on it and if you've achieved that, why not just take the money and run?
I'm new to trading, but the one thing that I've read over and over again is don't get greedy.
What were your expectations? How much did you think you would make on it and if you've achieved that, why not just take the money and run?
Remember, once you have the "house's" money it becomes your money.