That is also true but I try not to drink and invest ;-)
When you are long and nothing is wrong
- Thread starter TrustyJules
- Start date
If that's the feeling you get from SQ right now it means you don't believe in the stock now to keep push upward so no need for playing strategy, just take the money and move on.
staying in the position when you don't believe in it anymore is greed or stupidity, take a pick.
The vertigo is due to the size of the position in my portfolio not due to the stock quote itself.
Its what I did Friday - the position went from a minor 1500$ position bought on momentum vision in August to a position that was worth >6000$ - so I traded the 30$ calls for 60$ calls halving the position but remaining delta equivalent to the previous position.
There is no ideal way of doing this would be the conclusion from my post. Should SQ continue to rise I will miss out somewhat but if it consolidates or draws down for a while I am likely losing less knock for knock. Probably what I was musing is not feasible as it requires maintaining both delta and gamma equivalence when doing this swap.
There is no ideal way of doing this would be the conclusion from my post. Should SQ continue to rise I will miss out somewhat but if it consolidates or draws down for a while I am likely losing less knock for knock. Probably what I was musing is not feasible as it requires maintaining both delta and gamma equivalence when doing this swap.
My expectation is for the stock to continue to rise - a setback to 25$ is not excluded in the next year but nothing worse than that. More likely the stock will peak in the short term before dropping to the 30-35$ mark after which a sideways movement of a few months will occur before the rise will proceed.
As these are option positions neither SL or TP are implemented. Furthermore its a long position which I would reconsider only in the context of a major market change or a serious breach in the uptrend momentum of the stock. More generally I try and keep my positions below 5% each of the total size of the portfolio - preferably around 2.5% and hence a good size is around 5K.
As these are option positions neither SL or TP are implemented. Furthermore its a long position which I would reconsider only in the context of a major market change or a serious breach in the uptrend momentum of the stock. More generally I try and keep my positions below 5% each of the total size of the portfolio - preferably around 2.5% and hence a good size is around 5K.
You provided the answer to your question: "the delta is practically 98%" - so it's going to behave like long stock. What other option strategy gives you that high of a delta yet lets you book some of your profit, reducing risk? None.
In this situation, I would have taken a good look at a collar for Mar or Jun. You could have a Jun 45p/60c collar for maybe a $1 debit. With SQ at $49, you'd have $8 of upside at near term expiration.
The downside would be $1 to $5 , depending on when it drops. The reason for the $4 spread is that if there was a huge drop, the long $45 put would go to parity but your long $30 call would have decent salvage value. IOW, the downside is dependent on when and how far SQ drops.
If SQ moved up but stayed below the short call strike, at near term expiration you could roll the current near worthless collar up, locking in additional gain while extending upside profit potential.
It's not a better strategy than rolling the calls up since it limits the upside but it locks in at least $15 of the present value of your $30 call (it's a vertical of sorts). As others have suggested, choice of forward strategy depends on your outlook as well as fear and greed (R/R).
Here's a follow up on the Jun 45p/60c collar suggestion.
With SQ dropping from $49 to $40, your former Jan '19 $30 call lost about $8. At the same time, the Jun 45p/60c collar gained $6 at the natural. Since the B/A spreads are Holland tunnel wide, if so inclined to adjust again, you might have seen as much as a $7 collar gain if you got a friendly fill on closing (or rolling). I'd guess that your current Jan '19 $60 call lost about $4, maybe double that of the original position with the collar.
This isn't a 'told you so' comment but merely a learning moment for anyone interested in seeing real time performance of different approaches.
With SQ dropping from $49 to $40, your former Jan '19 $30 call lost about $8. At the same time, the Jun 45p/60c collar gained $6 at the natural. Since the B/A spreads are Holland tunnel wide, if so inclined to adjust again, you might have seen as much as a $7 collar gain if you got a friendly fill on closing (or rolling). I'd guess that your current Jan '19 $60 call lost about $4, maybe double that of the original position with the collar.
This isn't a 'told you so' comment but merely a learning moment for anyone interested in seeing real time performance of different approaches.