OIH call underwater

Discussion in 'Options' started by a529612, Jan 8, 2007.

  1. I'm long Jan 125 call @ 9.3. My sentiment is still bullish but less so now. Should I turn it into a bull spread by selling Jan 135 call for 1.5 and lower the BEP? Thanks!
  2. What is BEP?
  3. Looks like any major changes in the warm weather pattern will be short lived.

    Remember that gas was mid $4 in September before any knowledge of warm winter and storage surplus.

    I say OIH may have some more downside.
  4. BEP (breakeven point) I'n not sure I would turn it into a spread at this point...once you do that you are more married to the position. The cost of a 125/135 vertical today is $5.20 so you would be paying a rather rich premium for your trade.

    Any straight put or call purchase or sell is a directional bet and so far you have been wrong. You still may be right so you could hang on for the ride but you might be better off closing it and taking what little time premium you have left.

    OIH is nuts... I've been screwed more than once with it

    edit if you really think there is some hope..sell your 125 call for$6.45 and take $1.9 of it and buy the 130/135 vertical.
  5. If you were willing to risk $930 and you are still bullish NOW, then how about this:

    Buy 2 more Jan 125 Calls at 6.4
    Sell 3 Jan 130 Calls at 3.2

    Cost of Jan 125 Calls = $2210
    Proceeds from Jan 130 Calls = $960

    Total Cost of 125/130 spread / max risk $1250
    Max profit = $250 with OIH at 130 or higher

    Of course, do your own DD before opening any additional positions.

    Good Luck,

  6. MTE


    It's the same as what Richard has pointed out above, he pays almost 1 point premium over the market price for a vertical. That is, 125/130 is currently trading at 3.2 and he pays 4.167.
  7. He pays a premium for the spread, but his breakeven is lower and his profit potential is higher.


  8. MTE


    He's risking 4.167 to make 0.833. Not a great risk/reward ratio. If you ask me, adjusting a losing trade is a loser in itself.
  9. True, averaging down is not always the best strategy, but the OIH acts more like an index and the original poster maintained that he was still bullish.

    4.167 to make .833 is almost 20% in 10 days. Not too bad of a return.


  10. I think AZD is offering a good choice, mine is just reduce your loss basically and his is put a little more risk on the table to make a gain. I'll be interested to see what the OP actually does if he will share. A trade like this really is one of risk management balanced with good analysis of what the equity might do. (directional analysis)

    #10     Jan 9, 2007