Need some advice from the options experts

Discussion in 'Options' started by wooldog, Jul 15, 2011.

  1. wooldog


    Back when AAPL was trading in the 340s and had already made a big run, I entered this trade:

    Short: August AAPL 320 calls

    Long (double the number): of August AAPL 345 calls

    The trade was put on for an initial credit of around $3. I could sell it now for a debit of $4 or so.

    The trade has done well for me, with very little risk. I'm wondering what the experts here think I should do next. I'm itching to take profit, scared of losing what I've made, but earnings is coming up. Is it too risky to hold through earnings?

    Any creative ways of adjusting or locking in some gains?

  2. rmorse

    rmorse ET Sponsor

    If you're not sure what to do, take off half.
  3. It's a beautiful trade, having done my fair share of back ratios: you picked a volatile underlying, perfect for this structure; the bought options were at their max gamma; a true work of art.
    My first instinct is to just take the profits before they report, which is Tuesday if what I checked is correct.
    I stared at it and considered alternatives for a long time, but couldn't come up with anything that works better. Taking profits is how you get rich, after all.
  4. wooldog


    Thanks for your feedback rmorse and trefoil

    I'm still in but will likely take your advice and close before today or end of day tomorrow...although I'm so tempted by earnings, which I think will be a blowout. The plan was to close right before earnings.

    What about delta hedging the position? Just in theory because there are too many deltas for my account size to get the delta back to zero.
  5. wooldog


    Got out at 10 and some change, I left a little on the table, as its trading at $11-12 now, but it's hard to time things perfectly. What an incredible day for AAPL!