LinkedIn Iron Condor Gone bad.

optioncoach said:
I always love it when someone asks this question about a position that is a losing one. Attention all traders, with all due respect... if you are asking the above question you should not be putting $0.01 into any trade at all because you lack the fundamental knowledge of risk. Sorry but 'tis true...
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I am a bit confused to why you have a $400 exposure currently. Did you long the condor or short? I assume you are at the long end of it (you are hoping it range bound even post earnings..... let's ignore the logic behind this). So the short put is at 155, and long put is at 150. Ignore the call positions (which are both OTM), where did your $400 loss per contract come from? At 108 close for LNKD, all you have a $5 exposure per contract on the put side. It should be $5 no matter how low the stock goes.

What was your trade?
 
I think what he means is he lost 4$ per contract. He probably received around a buck credit initially (which he subtracted from the exposure) and he probably multiplied the 4$ loss with the contract size (100 shares / contract). Who knows based on the initial question though? Seems like a trade put on by a earnings play guru following service (e.g. tastytrade). He should be happy it was defined risk ;)
 
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sysdevel99 said:
I think what he means is he lost 4$ per contract. He probably received around a buck credit initially (which he subtracted from the exposure) and he probably multiplied the 4$ loss with the contract size (100 shares / contract). Who knows based on the initial question though? Seems like a trade put on by a earnings play guru following service (e.g. tastytrade). He should be happy it was defined risk ;)
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If it is ($400) total P&L.... that's a cheap lesson. Don't try to roll any of this to next month. Maybe next time, sell the condor! hahaha.
 
mickmak said:
If it is ($400) total P&L.... that's a cheap lesson. Don't try to roll any of this to next month. Maybe next time, sell the condor! hahaha.
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There is also a lesson to learn from the opposite trade of his IC - don't buy debit spreads, go with long positions only. The short leg is like having an anchor attached to your trade.

Based on the OP's quotes the 150p/155p and 225c/230c OTM debit spreads would have cost about $100.00 and made a profit of about $400.00 - the maximum. Factoring in the bid/ask the numbers will be slightly different, but not by much.

Being long only the 155p/225c strangle would have cost about $150.00. After earnings LNKD dropped to about $110.00 - the 155 puts could be closed for about $4,500.00.

  • 150p/155p and 225c/230c OTM debit spreads = $100.00 risk $400.00 profit
  • 155p/225c OTM strangle = $150.00 risk $4500.00 profit



:)
 
OptionGuru said:
There is also a lesson to learn from the opposite trade of his IC - don't buy debit spreads, go with long positions only. The short leg is like having an anchor attached to your trade.

Based on the OP's quotes the 150p/155p and 225c/230c OTM debit spreads would have cost about $100.00 and made a profit of about $400.00 - the maximum. Factoring in the bid/ask the numbers will be slightly different, but not by much.

Being long only the 155p/225c strangle would have cost about $150.00. After earnings LNKD dropped to about $110.00 - the 155 puts could be closed for about $4,500.00.

  • 150p/155p and 225c/230c OTM debit spreads = $100.00 risk $400.00 profit
  • 155p/225c OTM strangle = $150.00 risk $4500.00 profit



:)
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Or Maybe not trade a position that performs best with low volatility into earnings.
 
Yeah, who cares about theta decay and downside protection and any number of other reasons one might want to put on a spread? Listen to Option"Guru". He knows where it's at.
 
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