GE APR 17.5 Call perfect example of why chasing pennies can kill you.

Discussion in 'Options' started by KINGOFSHORTS, Mar 12, 2010.

  1. The calls were pretty OTM early and trading for 2-3 pennies a contract. (17.5)

    But if you were short those calls and were too cheap to close them out trying to grab those last pennies, you are probably shitting your pants now. With a long two day weekend waiting for monday :)

    800% increase from yesterdays closing price of 2 pennies. Perfect example why trying to chase those few pennies could put you at a very high risk of ruin.

    Now this is what you call the ultimate penny play (casino trade)

    Lets say you wanted to gamble 100 bucks going long 50 contracts for a penny jackpot play.

    Today you could have won (if you said deal when asked deal or no deal) 900 dollars.

    Or you could have said no deal and GE crosses 17.50 and you win on on a big jackpot next week. (Or lose and end up with the 1 dollar suit case)
  2. jasonc


    I assume you mean the march calls but ya that is actually pretty insane. These actually look like a decent investment in the sense of a positive expected value lottery ticket. what do others think?
  3. Correct March, somehow I put APR instead :)

    It is an insane return for a very short period of time. Open interest and volume has been growing on those March calls as well this week.
  4. lakai


    lol I bought a bunch of march 19 calls for .01 and look at them now bid .02 ask .04
  5. I have GE april 16 short put,doing very good with such a monster move,still holding till monday.
  6. Just to make a note of it, GE still going up, Mar 17.50 call now at about .65. This is up from a contract low of .01!

    I agree that this is a good example of chasing pennies killing! Of course, not to say it's good to buy options priced at .01, as they normally would have a tiny chance of working.

  7. If you would have bought at the 2 cents price (200 dollars) for 100 contracts.

    at 65 cents you would have a profit of 6500 dollars.
  8. The cost to buy/sell these options is enough to be killer.
  9. I dodged a bullet buying to close my 17.5 april covered calls for 3 cents. I would have given up so much upside. But I kind of feel dumb not buying to open those and cashing in. I got spooked when Open interest kept going higher so I jumped out.

    Oh well.
  10. Last trade 76 cents for the march 17.5 calls.

    I would love to know if there were any naked call sellers who got slammed on this one.
    #10     Mar 17, 2010