No. of Recommendations: 1
TMF Elan wrote:

Lucky you! There's no need to be scared. With options you can do something
about it and still stay in the game. Your AAODD closed today at a bid of
137 3/4. Assuming you own one contract, that's worth $13775. The option
price is more than 1/3 of the stock price which means that going forward
you can get less than 3:1 leverage.

It may be time to scale up. Sell your AAODD and immediately buy AAFDH,
the Apr00 strike 340 call. Its ask was 61 3/8 today. You'll be taking about
$7600 off the table and you'll still have a QCOM option that allows you to
gain further if the stock keeps running.

But think about this carefully. You'll be paying a price for this insurance.
The time premium on your current option is $12.  The premium on the new one
is $56. So you'll be paying $4400 to lock in $7600 of gains while staying
in the game. The new option will take you back to potential leverage of
close to 6:1.

Think about it. I'm not sure I would do it myself but it's worth considering.
I'm no expert so I don't know if there are better ways to accomplish a
similar outcome.

For what it's worth, here is my real-life example of rolling up QCOM and
JDSU options.  (And I hope I do this math right...)

          9/2               11/8                11/12
1 AAODS   24-3/8 $2451.50   108-5/8 $10848.50
2 AAFDF                      33-3/4 $ 6766.00   93-1/2 $18684.00
  QCOM    167-1/4           292                 378

That is, on 11/8 I sold one AAODS (QCOM Apr195 Call) that I had bought on
9/2.  I took $4082.50 off the table and bought 2 AAFDF (QCOM Apr330 Calls).
Today, those are valued at $18,684.00 (taking into account the commissions
I'd pay).  Total value (cash on the side plus the AAFDF options) is now
$22,766.50 for an increase of 829%.  QCOM has increased 126%, so that means
an overall leverage of 6.6X.

AAODS currently has a bid of 189-3/8, which means that if I'd not rolled up,
I would only have $18,923.50.  So not only did I lock in a $4,000 gain by
rolling up, but I also got about $4,000 more profit.

For my JDSU options:

          9/27              11/1               11/12
2 UNQCE   11-7/8 $2391.00   50-7/8 $10159.00
4 UQDCT                     10-3/8 $ 4170.00   29-3/4 $11880.00
  JDSU    111-15/16                            200

I sold 2 contracts UNQCE (JDSU Mar125 Calls), kept $5989.00 and bought
4 contracts UQDCT (JDSU Mar200 Calls) which are now worth $11880 for a
total value of $17,869.  This is a gain of 647%.  JDSU has risen 78.7% over
this time, giving the options an overall leverage of 8.2X.

If I hadn't rolled up, the 2 UNQCE option contracts would be worth $15,884
(bid = 79-1/2, and accounting for $16 commission).  Rolling up locked in
about a $6,000 gain and still gave me an additional $2,000 over where I'd
be otherwise.

BTW, many thanks to Prof. Sparfarkle, for selflessly contributing the
knowledge and the confidence to begin trading options!  And thanks also to
those who developed all the wonderful screens that led me to choose QCOM,
JDSU, AAPL, SUNW, CY, CTS, ADBE and USM as underlyings.  I only started in
September, but my initial $18,000 stake has already grown to over $66,000!
It's incredibly mind-boggling to me.

Best regards,
Craig
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