I Gambled on RIMM, Now What?

Discussion in 'Options' started by JTG, Dec 17, 2009.

  1. dhpar

    dhpar

    exactly - a delta trade.

    another possible course of action is to follow pension_admin advice.
     
    #31     Dec 18, 2009
  2. marine

    marine

    You admit that it's a gamble.

    So unwind it and take a profit and move on to the next trade.

    If you what to play with it (since you have nothing better to do) watch the pre market if it goes against you short the stock and then unwind both positions once the market opens.

    Remember today is expiration and people will start to take profits over the next two weeks as well.
     
    #32     Dec 18, 2009
  3. First, answer this: What typically happens wrt implied volatility in a situation like RIMM this morning?

     
    #33     Dec 18, 2009
  4. You should wait for the options to go through rotation or you will have not get a good price. It takes 5 - 15 minutes for them to price. Unless you think they are priced in your favor, then you can unload them.
     
    #34     Dec 18, 2009
  5. dhpar

    dhpar

    ok. i spent my time with your idiotic advise only because your handle is old - but now i see the time was wasted because you even can't read english.

    everybody knows what happens to vol - but that's not the point here. the fact that someone decides to play earnings means that the vol decrease must be incorporated in risk/reward before the trade is taken. there is nothing you can do with it after the earnings. and most importantly vol is of second order here anyway - you seem not to get it.

    out.
     
    #35     Dec 18, 2009
  6. Jan vol was 1/3 of Dec.
     
    #36     Dec 18, 2009
  7. spindr0

    spindr0

    When you have a big option gain from an after hours EA, you have two issues to deal with.

    The first is a reverse in the underlying prior to the opening of option trading the next morning. If your concern is locking in some of that gain, you hedge the position with stock. To do this in less than a haphazard way, you need to estimate the delta of your position and short shares for whatever portion you wish to lock in.

    Yes, this makes the position more complex. Yes, It may cost you some money if RIMM moves up more (opportunity loss). But AFAIK, the last thing I'd want to do is see a large gain turn into a small gain before you even have a chance to close the options (RIMM drops big time before 9:30 AM).

    The second issue is the obvious one that many have mentioned. IV is going to collapse in the AM. If it's big time right at the open and gets back to normal levels, you might hang in there if you're still bullish. If it drops but not down to normal levels, your best exit is ASAP since throughout the AM, IV is likely to drop more. Doing nothing is going to cost you money. The only reason to absorb that loss is if RIMM is moving up and your position is gaining in value.

    If your bet is that RIMM goes higher, none of this matters. If you want to lock in and maximize the current gain, it does.
     
    #37     Dec 18, 2009
  8. spindr0

    spindr0

    I'd also add that if RIMM was moving around actively in the pre/post market, holding these appreciated calls would give you a chance to trade RIMM from the short side during after hours.
     
    #38     Dec 18, 2009
  9. overkil2

    overkil2

    I would sell half and play with the house's money, but that's just the poker player in me.

    I'm new to trading, but the one thing that I've read over and over again is don't get greedy.

    What were your expectations? How much did you think you would make on it and if you've achieved that, why not just take the money and run?
     
    #39     Dec 18, 2009
  10. Remember, once you have the "house's" money it becomes your money.
     
    #40     Dec 18, 2009