After taking into account options expiration day, and that this is a pure gift, I took the house's money and ran. Additionally, after reviewing other recent earning suprises, it seems I was going to lose some premium due to contraction of volatility. I initially sold 5 lots at $ 7.50 and just didnt like the way RIMM was trading. So, I offered the balance at $ 7.50 also and got filled. At the moment, it looks like the right thing. Then again, now that I liquidated, we'll probably see this option close today at $ 9.00. Helpful site if anyone finds themselves in a similar situation: http://www.ivolatility.com/calc/?ticker=rimm Thank you all for your input. I greatly appreciate it! All best to all, Howie
Well, I will revisit my suggestion to sell a Jan call as a hedge, since hindsight is a wonderful educator: It is 7:38PT and currently the Jan10 70C is trading at $3.05/$3.15. So let's say we sell the 70C: Our 3 scenarios at expiration become: 1) <65 => Lose on long, keep the short: P/L = -$3.30 + $3.05 = -$0.25. 2) 65<x<70 => long goes ITM, short expires: P/L = -$3.30 + $3.05 + Close-65. Max profit = $5.25 3) 70<x => both go ITM so your max profit is same as #2. At the moment, the gap has filled about 1/3 of the way.
Yes I do trade for a living, and yes I trade a lot of options. Your rudeness is misplaced. Of course this is not a vol trade, but the issue is that the OP bought an option with inflated implied vol before earnings. (A silly thing to do btw.) He got a gift. From an execution standpoint, whenever you have anything on that is better than expected the smart thing is to offer it out higher than you think you can get filled, then join the offer, then penny the offer, then hit the bid. That is the correct course of action and that is what I was advising. Using today's open price and yesterday's implied vol gave you an optimistic price, which in these circumstances is filled much more often than you would think in the opening noise. You're counting on the opening noise -- the public recklessly paying offers and hitting bids (which is EXACTLY THE OPPOSITE of the advice i gave the OP) and maybe someone will take my crazy offer as part of a spread or to hedge some risk in their book. For a new trader complicating the trade is never the right thing. It is obvious that OP is a newer trader, which is fine. I don't understand the tone and rudeness of your post. I have done literally thousands of option trades and know a bit of what I'm talking about.
Who's the idiot that can't read English? I said calculate your price before the open based on where it will open. I said nothing about unwinding after hours. Also, my advice was to take half off the table first thing on the open and I gave the OP specific advice on how to get the best possible fill. WTF is your problem dhpar? How did that confuse you?
Here is a way to work out those prices before like previous poster suggested. We were discussing another RIMM guy that took the opposite bet of you in chit chat. "My wife is going to kill me, I blew my account on RIMM" He bot the Jan 60 puts.