OP, why not hold the whole thing til expiry? I understand realizing profit feel great, but if the realized profit is kept in the same trading account, the money is actually still in the pool. There isn't really much difference between realized and unrealized profit. (You could realize the profit and quickly lose it in the next few trades.) Imagine tomorrow you are entering a whole new trade, then think about where your stop would be, then just use it to get you out. However, if you believe there is a better use for the profit, then close the trade immediately to "lock in" the profit. PA
I am new to options and I am just curious about how selling the call work. Would that be limiting the upside in this case, since the counterparty has the right/option to buy the underlying from you at the strike price (lower) when the price go further up?
Well, I threw that idea of selling the call out off the top of my head, because I thought you'd get $3.30 for an ATM once it opens, but it doesn't look like you get anywhere near those prices on my TOS table, so it probably wasn't a great suggestion after all.
I think you should double up by rolling your options into further out-the-money calls close to expiry. All in baby!
Good question - the reason I chose Jan. calls was because if my guess was incorrect, I would still have a bit of time for the stock to come back to, or near my initial entry point.
but you CAN'T unwind this trade AH! on the rest; are you sane? what is complicated on trading the underlying when you trade options? do you trade for living of for institution? anybody trading for living would take some money off the table righ away. let's say RIMM trades at 71 AH. you pretty much know from top of your head what is the delta of your 10 jan 65 calls. say that after decent earnings you are comfortable with taking half of the position off the table and sell 300 shares. so you now have 3 (synthetic) puts and 7 calls instead. there are some good reasons why 10 options like that after the gap is better than simply 10 calls. when the market opens you can choose several ways to trade out of it by combination of options AND stock. if the stock corrected back to 65 you at least made 1.8k with few hundreds lost on options. your idea of trying to get out on the open for high vol AND high AH price is not a trading strategy. it is like putting bids at 10% discount and hoping that the mess of the upcoming open will fill you... the advice of selling half after not filled immediately on market open is "strange" to say the least - you will almost certainly get whipsawed most of the time, i.e. sell very low. note: if you want to play vol only then you should not have 10 naked calls to start with. the trade OP did is a delta trade - not a vol trade! that's where the most of P&L comes from and therefore that's how you primarily have to manage it.