Sell a losing long call?

J

john7722

Hello ,

How do you deal with a losing deep ITM long calls if you still believe that stock will recover in the next 3-6 month ?
Do you sell it and buy another call with a different strike price and expiration or just keep it until expiration?

Thank you
 
If it's itm, at a loss, and you believe underlying is going to go up, you could let it expire, get the shares assigned and take it from there.
 
Can you explain a bit more what we are considering here... "losing deep ITM" so are we looking at it from the buyer's perspective, the buyer has purchased an option with, say, delta above 80, and now the delta is at 70, so the said options have lost 10 deltas?

If you can bear with me, I will take the Socreatean approach with you based on your answers, and we will arrive at the ultimate answer together instead of making several assumptions.
 
if you still believe that stock will recover in the next 3-6 month ?
More...
Well, if it's so obvious, then wouldn't the market also know this, and price things accordingly?

Just curious what makes your crystal ball so much better than everyone else's in this scenario.

I think we need to come to agreement here, before we even tackle the mathematics...on where to go next.
 
I am not saying it will recover. I believe it will recover and I am willing to take a chance and hold it for another 3-6 month , the same way I would as if I owned the stock.
 
W-M-A said:
Can you explain a bit more what we are considering here... "losing deep ITM" so are we looking at it from the buyer's perspective, the buyer has purchased an option with, say, delta above 80, and now the delta is at 70, so the said options have lost 10 deltas?

If you can bear with me, I will take the Socreatean approach with you based on your answers, and we will arrive at the ultimate answer together instead of making several assumptions.
More...

I own LMND dec17'21 50 call
I bought it for $30 now it is $24
So I am losing $600
I would like to keep long position in this stock but not sure how to figure out when to sell it and buy a new option with a dif.exp date and strike price.
thank you
 
W-M-A said:
Can you explain a bit more what we are considering here... "losing deep ITM" so are we looking at it from the buyer's perspective, the buyer has purchased an option with, say, delta above 80, and now the delta is at 70, so the said options have lost 10 deltas?

If you can bear with me, I will take the Socreatean approach with you based on your answers, and we will arrive at the ultimate answer together instead of making several assumptions.
More...

Socratic. But yeah, everything else makes sense.
 
john7722 said:
I own LMND dec17'21 50 call
I bought it for $30 now it is $24
So I am losing $600
I would like to keep long position in this stock but not sure how to figure out when to sell it and buy a new option with a dif.exp date and strike price.
thank you
More...

Did you buy a single leg ITM for 30$ on a 50$ strike?
 
john7722 said:
I own LMND dec17'21 50 call
I bought it for $30 now it is $24
So I am losing $600
I would like to keep long position in this stock but not sure how to figure out when to sell it and buy a new option with a dif.exp date and strike price.
thank you
More...

You could reduce cost/risk if you're willing to convert to a spread and limit profits.

50 Call: 24.60 (premium above intrinsic = 3.30)
Max loss = $2,460
Max profit = unlimited

60/95 Call Spread: 13.30 (premium above intrinsic = 2.00)
Max loss = $1,330
Max profit = $2,170

***Both are Dec '21 options
***If price reaches/approaches 95 prior to expiration, you could roll the spread up & out to increase profit potential. (60/95 Spread trade)

a.lmnd.png
 
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