First Option Trade

Discussion in 'Options' started by Crude Man, Mar 19, 2018.

  1. I just put on this option trade. Expires April 18, when should I exit to make the most profit? Thanks. Screen Shot 2018-03-19 at 9.52.02 AM.png
     
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  2. lindq

    lindq

    When should you exit your Facebook put to make the most profit between now and April 18?

    Sometime in the next 5 minutes.
     
    Last edited: Mar 19, 2018
  3. ha ha seriously? so if i held it until April 18 and it was trading at $150 then, would I still make a profit?
     
  4. lindq

    lindq

    Yes, and if FB is below $160 on April 15 you jump to the head of the class and get the chicken dinner.

    But good luck with that.
     
    Crude Man likes this.
  5. I don't even know what that means, this is my first option trade and i have done some reading before putting on this trade. So as I get closer to the expiration date or with every passing date, does my probability of making a profit become smaller?
     
  6. lindq

    lindq

    You have not asked for advice, and I never offer it on specific trades. But if it was me, and I just wanted the learning experience, I would ditch most of my position for ANY profit and let a few puts ride as a learning experience, so you can watch it play out.

    As this is your first option trade, I would have much preferred that you took on 1 put as a learning experience, instead of 20.

    Unless you have a very specific system that's proven profitable, long options are a very tough way to try to consistently profit in trading. The decay can be a killer, unless your underlying makes a very sharp move, which in the case of FB is possible, but very unlikely because buyers are happy to rush in and support it.

    Best of luck!
     
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  7. Thank you appreciate it, seeing a nice profit now, when I put on the trade, I realized I could not lose more than $2200 on this trade which is well within my risk profile that my account can handle.

    I am going to take half off at the end of the day and let the rest ride for the next week or so, I don't think FB breaks $170 - but then again who knows anything. Better to lock in profits. Lucky newbie option trade here. Thank you for your help.
     
  8. Lee-

    Lee-

    This statement makes me think that you may not understand the position you've opened. Do you mean that you don't think FB will drop below $170?

    The options trade you opened is a bet that FB will be below $158.96 on or before April 18th. The reason you're seeing profit now is that FB dropped quickly this morning which caused an IV spike, but as expiration approaches and FB remains above $160, the value of those options will approach $0. Your break even point is if FB is at $158.96 (ignoring commissions+slippage). For each dollar FB is below $158.96, you will profit $2000. If FB is above $160, you will lose 100% of it.

    Be sure that this is the bet you intended to make. If not, consider yourself lucky that FB dropped this morning and close the position.
     
  9. This is the analyzer on Tos, it is not a real trade
     
  10. Thank you @Lee- for the detailed explanation and education. It will come in handy going forward. I still intend to lighten my position this afternoon before market close. Unless this is a Valeant or Enron - which it isn't, I guess its better to take profits quickly and exit.
     
    #10     Mar 19, 2018
    tommcginnis likes this.