Quote from wabrew:
If it opens lower on Monday I will want to either close position or ...... could you possible "articulate' on any low-risk adjustment you might make.
A couple of thoughts:
1) If you're still bullish on the stock, sell the 110 for .85. That cuts your risk by 1/3rd while still allowing you to profit if you're right.
2) If you think it's simply going to oscillate down to the 98 range and come back, sell the Feb 105, and buy it back when the price hits 98.
3) If you think it might break out low, short the stock now--it effectively turns your long call into a long put.
4) If you think it might break out either way, the volatility increase will likely be big, so buy the 100 puts as well and turn it into a strangle. At $2.40 per side, the break even for the strangle is well within the trading range of the stock for the last 2 months, so even if it doesn't break out, you can still profit on oscillations.
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So, #1 reduces risk by 33% but reduces your profit potential. It also significantly reduces theta if you're concerned it will just hover in this range for a long period of time.
#2 reduces risk, and allows you to maintain a long term bullish outlook and still profit on a short-term adverse movement.
#3 allows you to play it directionally. If you believe it's about to break out, this would have a straight "put" return graph.
#4 increases your total exposure ($5), but breakeven seems pretty close, particularly since you're buying March's. And if a breakout occurs, you can profit very well.
All 4 have a defined risk. Some increase risk to give greater profits. Some reduce risk to give lessor profits. In the case of the spread, you can make even more money if you're wrong first. (i.e. if it goes down to 98 then comes back, the spread allows you to profit twice).
I love options.
