So I rushed into a trade that I thought looked promising. Not much money so that's no big deal, but I have some questions and as long as you answer them helpfully you can insult the crap out of me as well : )
Got into a calendar spread SVNT last week. Sold Jun 5 @ 1.86. Bought Jul 5 @ 2.14 (.28 debit spread). The imp vol is high because of an FDA panel for their drug on the 16th. The high imp vol obviously meant my break even points were pretty wide (about 3 - 10) for a stock trading at 5.50 when I entered into the trade.
My plan is to close the trade on the 15th taking advantage of theta decay and not risk exposure to the wild price swings that will certainly occur after the FDA meeting gives either good or bad news.
So if you take a look at the spread today we are looking at .20 and falling, obviously a short term loss, while the stock sits comfortably within range at 5.72. It just seems like Jul isn't holding up its end of the bargain in the short term and I suppose that has a lot to do with the lack of liquidity in the Jul options.
Am I simply not giving this enough time to play out? I know with theta accelerating as we approach expiration things will look a lot better on the 15th when I plan to close this out.
Or are there things I'm not taking into account here (certainly) that are hurting me?
Thanks for your help.
Got into a calendar spread SVNT last week. Sold Jun 5 @ 1.86. Bought Jul 5 @ 2.14 (.28 debit spread). The imp vol is high because of an FDA panel for their drug on the 16th. The high imp vol obviously meant my break even points were pretty wide (about 3 - 10) for a stock trading at 5.50 when I entered into the trade.
My plan is to close the trade on the 15th taking advantage of theta decay and not risk exposure to the wild price swings that will certainly occur after the FDA meeting gives either good or bad news.
So if you take a look at the spread today we are looking at .20 and falling, obviously a short term loss, while the stock sits comfortably within range at 5.72. It just seems like Jul isn't holding up its end of the bargain in the short term and I suppose that has a lot to do with the lack of liquidity in the Jul options.
Am I simply not giving this enough time to play out? I know with theta accelerating as we approach expiration things will look a lot better on the 15th when I plan to close this out.
Or are there things I'm not taking into account here (certainly) that are hurting me?
Thanks for your help.