I meant to post something along the lines of, "you're nuts". I mean that in a flattering way First off, the position in BPUR isn't a jelly roll, but a good old fashioned time spread. A "jelly roll" is a lock, in other words, the positions P/L is theoretically already made and all you have to do is wait till expiration to collect your cash. This is theoretical and there are ways these things can blow up. I was using a the jelly roll as a device to help price the time spread and also to possibly take off the position by locking it in. Since the position was put on, I have been constantly looking at both the calls and puts to take my profit. There have been times when I nearly did take my profit by trading puts as oppossed to calls. However, I have traded the calls to take profits here or, I should say gain more. I have been buying in the July 5c and selling July 7c. This once again is done for a net theoretical IV edge. When you put these trades on, whether it is this time spread or the 1 by 2, you take them off when the market gives you edge to do so. When I did the BPUR trade, I had no opinion on it what so ever(I do have an opinion on the stock but not the option trades). It was done for nice edge and will be taken off when the markets line up the way I think they should. The DNA is similar, but I did have more of an opinion than BPUR on the options side. I wanted to sell some front month vol. I bought the cheapest thing I could find on the board. I then looked for a hedge in the June calls. The atms looked as good as any(plus I had margin limitations on what I could trade, I do have on a sizeable csco position which I need to preserve capitol for) and it would give me about 13 vol points of edge. I would take it off when either it plays itself out or they give me edge. It could be unwound any time I want to right now, the theoretical edge has played itelf out. I'm leaving it on because it is a 1 by 2 and a move up would be a couple of bucks for a beer. To sum everything up, you take off the position: 1. The market either gives you edge or maybe no edge to take the opposite or different position. In BPUR, I have bought in the July5c and sold out he July7c for edge, taking profit by taking a different position. 2. The trade has played itself out and there is little profit to be had from leaving it on. This what happened with DNA and now the position is just a play on the underlying and not the options per say. 3. To cover your ass because it has gone against you. This shouldn't be too bad because it was put on for edge to begin with. I don't understand your study about vol explosion. Why shouldn't it change everything? I trade vol and an explosion is the equivalent of DNA jumping 50%. It is entirely possible to be on the wrong side of that which is why I like to put positions on for edge. It may not save you when it jumps 50% but it helps.
I'm listening to the BPUR conference call. The FDA approval for their facilities could come down early June.
I`ve never done this, that`s why I`m asking. The simulator shows me that once vol is very high, calendar spread can break out. BTW DNA does not work for me because of low price/underlying ratio.
Have you guys heard of this seminar? Coming to my town this week. Got two invites, both my real name and the fake one I used for a few other get rich quick seminars. I may poke over and see what oil these snakes are peddling.
Yes, I can see that, if the price hits 6 I will need to roll over, however the problem with stocks around $5 is, that next strike is too far vs. price of the stock. It means that must be at least above $10 to be in in the area of my interest. If it hits my ceiling level, I`ll switch into IGEN, IMCLE or ICOS. Thx for warning Trajan.
What is your town, trdmac ? I rarely go to such seminars, they usually present a lot of new ideas which needs a lot of work to check it out whether it makes sense or not, and finally I end up doing the same as before
Chris, I live in Raleigh, NC. I like to go once in a while to see what they are up to. But most of the stuff is either pretty basic or not real practical. The last one I went to was on buying notes, think it was ACFI. Then I came home and researched them and boy what a bunch of non-sense. However in fairness, just recently I was poking on the web and found a gov't note secured by property in TN that yielded 12%. The problem was the minimum bid was 165K for a 250K note, and that would represent a rather large position. I like to run ideas like this through my head, but with the web and at most a book from Borders you can usually get the information for much less than the $3,000 the seminar hucksters want to put you out.