MSFT call calendar gone sour

N

nixodian

anyone have any idea why MSFT has tumbled from aug23rd entry date, when l did a 37C calendar september20th november15th. Well l bought back the short september leg, and still have the long november leg, november leg has fallen by over ~70%, what would a knowledgeable option trader recommend? Just sell it and move on / roll it down to lower strike , constructing a ratio spread or vertical or just roll to a lower long strike?
Thanks for reading my post
 
The chart showed the tumble not in Aug but in July...what was the date you initiated the trade and price of msft at that time? MSFT is usually a decent calendar candidate but price has dropped thus the OTM november will drop even more. you can still sell the OCT call against the Nov to reduce your overall cost and hope it recovers in OCT. You could also sell a bit lower like 35 but your risk will increase. Difficult when the stock doesn't behave but at least you still have some time and opportunity.
 
Quote from RichardRimes:

The chart showed the tumble not in Aug but in July...what was the date you initiated the trade and price of msft at that time? MSFT is usually a decent calendar candidate but price has dropped thus the OTM november will drop even more. you can still sell the OCT call against the Nov to reduce your overall cost and hope it recovers in OCT. You could also sell a bit lower like 35 but your risk will increase. Difficult when the stock doesn't behave but at least you still have some time and opportunity.
More...

Hi RichardRimes,
on 23rd Aug 13, bought 2 MSFT calendars 37C, sep20 nov15 @0.54, nov leg@0.75, sept leg@0.21 (bought back at 0.05 on 28 Aug) MSFT was 34.77 when calendar entered
l agree with you, there was a fall in July, though l was confident it would go past 37 by november looking at the monthly chart, esp with the moving averages all positive and just below, still are now, but 37 seems a bit distant now, l need it to be above 0.59 to break even net?
selling oct 35call seems a good candidate, its trading at (0.22 0.23) as l write with msft @ 32.68. with details given you think good candidate? or l could sell my 2 x nov 37calls and buy one lower strike in nov or even earlier.
 
Sell out the position and move on. If you think a time spread is still the right play for MSFT then just reestablish at the right strikes, but the minimal revision to mean advantage you'll maybe gain from a continuous position is more than abated with jump diffusion. A pro always cuts and runs when the river is flowing the wrong way.
 
I would hesitate to go 2 strikes down on the OCT..while it would reduce your cost by 50% IF msft hits 35 in OCT it may cost you to close the diagonal. Of course if it did hit 35 you could roll up one strike and have a short vertical spread for NOV. There is basically little risk in selling the OCT 37 but you only get .12 for it..hardly worth the commission. However if msft goes to 36 or so in OCT then you can close for close to a profit or very small loss.

If you sell November and buy a new strike then you have closed your trade for a .30c loss and put on a new trade...if you are that confident of a rise in msft then don't sell.

Calendars work best close to the money so if a stock is trading at 34...I would have done a 35 or perhaps a 36 if strongly bullish.
 
really l should just move on, msft is a real lemon, and it has bought a lemon phone company nok. who buys a nokia phone ?
anyways sold both at 0.195 and bought the 34call october 18th at 0.45, so paid an extra 6 net, but l think thats a better prospect than 37calls november that l had on before, dont u's think?
 
Did you calculate your reward:risk for the trade? If your net debit (max risk) was 0.54, what was the trade going to be worth if MSFT had moved to 37 like you wanted?

If you didn't calculate this up front you shouldn't have entered the trade. Hint: you're not looking for 1:1 on directional trades like this.
 
You must log in or register to reply here.
Back
Top