Option Newbie Question

ashantt

ashantt

Please look at screen shot of my trade.

When should I look to get out? Should I leave this trade on until expiration? Do you think this position will turn profitable at any point? In what scenario will this turn profitable?

thanks.
 

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I remember your thread about this back in June...the position will only be profitable at expiration if the market drops 50% between now and March, which seems pretty unlikely. You might get lucky with a volatility spike that drives up the value of the puts, such as happened on a small scale the last 24 hours. But time decay is just going to continue chipping away at their value. I personally would close the trade now and take it as a relatively cheap lesson learned about buying a bunch of DOTM options without a very good reason as to why I think the trade will be profitable.
 
Quote from noregrets:

I remember your thread about this back in June...the position will only be profitable at expiration if the market drops 50% between now and March, which seems pretty unlikely. You might get lucky with a volatility spike that drives up the value of the puts, such as happened on a small scale the last 24 hours. But time decay is just going to continue chipping away at their value. I personally would close the trade now and take it as a relatively cheap lesson learned about buying a bunch of DOTM options without a very good reason as to why I think the trade will be profitable.
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Thank you! Lesson learned.
 
I would suggest also to delve into some options books to better understand how they are valued and the different types of trades available. Options are very versatile instruments but can also be very dangerous if you don't understand how they work and the risks. Sinclair's Option Trading and McMillan's Options as a Strategic Investment in my opinion are a good place to start. Good luck!
 
noregrets


Registered: Mar 2013
Posts: 115


08-27-13 02:06 PM

I would suggest also to delve into some options books to better understand how they are valued and the different types of trades available. Options are very versatile instruments but can also be very dangerous if you don't understand how they work and the risks. Sinclair's Option Trading and McMillan's Options as a Strategic Investment in my opinion are a good place to start. Good luck!

I second McMillan's Options book. Good luck!
 
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