Registered: May 2010
01-26-12 06:21 PM
Quote from probe1957:
The questionable wisdom of selling a naked call notwithstanding and as much as it pains me, I am going to agree with FF on this one. Do nothing. Hold the calls. They will expire worthless. Or you will lose your ass. Anyone with the nads to make a trade like this surely has the resources to cover it.
This logic is how some large trading firms got destroyed by renegade traders. They see the cheap prices of options and think its free money, when in actual fact the price represents a real estimate of a long shot event occurring in a short time frame.
In the case of AAPL and earnings, its not even a huge long shot, I think the market underpriced the chance. In fact, someone buying those calls could easily have made between 600% and 1000% return overnight.
I looked at the "trade" ( 95% chance the poster is phony ), and at close he had a chance to get out at a $13,000 loss after hitting a higher loss earlier in the day. Assuming no margin call forces the issue, losing $13,000 when quite conceivably you could lose $300,000 on any decent trend up is the right strategy. There is no way risking $300,000 to save $16,000 is a smart decision.