The MSFT APR20/27 long 90P calendar is a great buy here at $0.93. It's good for 20% in a week (Monday to Monday) I'd probably go with the put over the call on microstructure, but that's unimportant. I typically don't trade debits under a buck, but I'll revisit it next Friday.
With any option position you accept the risk before you open it. That's how you manage it. IMO GOOGL has very strong support at $1000. Earnings in a few weeks, April 23. GOOGL back to the level it was before the strong earnings of October 2017. I think GOOGL will run up before earnings.
0^3 makes a good point with respect to earnings. Stat vol contracts in the weeks trading into the quarterly. The majority of my trades are predicate on some stat-vol analog.
I see...This is what I had assumed. You are looking at prior stats and at this specific time, the probabilities look favourable.
I am trying to think about the risk before the trade... My mental scenario analysis tells me to unwind/exit if the price hits below 1000 because the thesis would become much less likely vs. when the trade was placed. Ie, if it hits below 1000, the probability of the position losing more increases imho. I can hold for a bounce back towards 1000 but my feeling about the trade would go from good r/r to bad r/r.
I'd be out for that reason. No recent close under 1000. A trade to 990 would be hard-deltas at that point (intrinsic).
I was going to PM this but I'd figured the broader community could benefit from this as well. @destriero I'm curious about this and hope you will humor me on an answer. Why do you keep doing this(trading)? I've followed you since the riskarb days and know you have more than enough personal net worth to stop, put all or majority into index or find a good fund with low beta and decent returns. Why not keep your focus on your other pursuits?
I have bought three or four stocks as investments since ~1989. In the last ten years it's been CREE and UBNT. I don't believe in passive index investing. I have had my IRA since 1990 and my personal trading is limited to the IRA. I lost $4MM of personal and family money in the ENE crash (not ENE directly). My wife lost $10MM in ALGX at roughly the same time. I have had three down years in my IRA since inception and now my primary focus is organic growth in the IRA. FWIW, I had gone a year or more without a single trade in the IRA during the mid-late 90s; so I am not touting that performance. It's amazing what you can do if hindered from capital-pulls. I took three months off to travel and it's was mind-numbing. I'd forget the day of the week. I just got back home from two days of backcountry camping in the Mt Rose Wilderness, but I had my iPad with me.
Will you have a different position management approach here vs. the GOOG trade? I'm guessing that in this trade, you will be more lenient for the price up/down because you are trying to capture theta? If the price moves to 87.5 or 92.5, do you unwind?