Position Correction on Long Calls

R

rickf

Okay, first time I'm looking at repairing a position, or at least getting ready to repair one.

If you are long a call, but the position's turned (or is turning) against you for one reason or other, what might be a decent way to minimize the loss on the call premium?

IE,

You're long 10 ABC Calls JUN 65 that are $700 in the red.

Stock price is 63.35, down from 64.90 when the option was purchased.

Would selling 10 JUN 60 puts 'repair' this position or at least minimize losses if the underlying continues to fall to the strike price on the sold puts? Obviously, if the underlying goes up, the put expires worthless, I keep the credit, and the call is profitable.

Is this a viable repair strategy on a long call position that's becoming unprofitable?

Thx for the conceptual guidance....repairing a position turning against me is something new for me here.
 
Is this another one of your paper trades, or a real trade? Is this with or without stock or any other option position?

You think selling puts will "repair" a long call? That would be like throwing yourself off a cliff to repair a broken bone.
 
Quote from opt789:

Is this another one of your paper trades, or a real trade? Is this with or without stock or any other option position?

You think selling puts will "repair" a long call? That would be like throwing yourself off a cliff to repair a broken bone.
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Oh, sorry -- yes, a paper trade. Problem is that the paper-trade system here aggregates gains/loss by position, and rather than split the position into two and try a put-sell versus a bear call...which would complicate its P/L reporting, I wanted to test out a single strategy to keep reporting simple.
 
most repair strategies are psychologically satisfying.

if you think it is still going up, you could look at selling two 65s and buying one 60 for a bull call spread. the numbers would have to make sense, of course.
 
rickf,
No offense, but you are asking basic questions about a very complex subject. It's great that you are starting with paper trading and not throwing your money away, but you need to be doing serious study if you ever want to trade options. There are many answers to your question but it depends on why you got into the trade, where you think the stock is going and in what time frame, your particular money and risk management levels, whether you have reg-t or pm, etc. Spend your time reading the websites and books that are recommended here.
 
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