Many people don't do that. The profit would be 1.1% in 3 weeks or 14% a year. Yes I know it is low !!. 200% profit is normal in the market
Update: YHOO has gone up from the time that I called it a short. I am still shorting it and at the same time selling PUT to maximize the profit. This is the same YHOO which was traded at $14 3 months ago. These are the last days of the run up. No stock goes up or down for ever. I also know two hedge funds are shorting it.
The rise of the market on the 1st can IMO be explained with the fact that retail gets it's paycheck on that day...
What price did you short YHOO at? Any plans to cover? http://finance.yahoo.com/q/bc?s=YHOO&t=5d&l=on&z=l&q=b&c=
http://www.schaeffersresearch.com/m...ig+and+bank+of+america/default.aspx?ID=113571 " Even with YHOO reaching another annual trading high today, option players are assuming a bearish course of action. The December 16-strike put has seen 4,800 contracts trade today (easily outpacing open interest), and 99% of the volume has changed hands at or near the ask price. These put buyers are betting on a pullback in the shares between now and December 21, as the breakeven point (at expiration) is $15.85, or the strike price less the average premium paid ($0.15 per contract). "
My Dec puts are deep in the reds: -32% But I still think it can turn to a profitable trade, even about +50% profit is IMHO realistic if two conditions are met: 1) IV rise from now 27% to 30% in the next 2 weeks 2) drop of YHOO by 2 or more % and both are realistic I think... just playing with my options calculator...
I have only the Puts (one slightly ITM strike and the other is OTM, bought via secondary market, ie. YHOO Puts issued by a European bank, UBS, but the development is almost 1:1 to the US quotes (after currency conversion). And re the underlying (YHOO): I mean percent, not points. To be clear: both conditions must be met: IV rise _and_ stock drop... only then will it work for me... If IV stays the same then stock has to drop at least 3% or so for break even...
I'm confused. You said your puts are in the red by 32% and you only need the stock to drop 2 - 3% to break even? Isn't a 2 % drop in YHOO only about $0.34 - $0.35.
As said:2% drop of stock + 3% increase of vola, OR yes, 3+% stock drop alone. The vola usually will rise when the stock turns south... based on simple chart reading, TA...