When a stock takes a dive..

Discussion in 'Options' started by Comptalk, Nov 6, 2006.

  1. If a option you bought gets hit hard and the stock takes a nose dive but recovers a few days later. Will the option recover also?
  2. It depends on the option. If the underlying stock recovers and the SAME volatility is priced into the options, then yes the option will recover, minus the few days worth of time decay.

    It is fairly unusual though for a stock to tank and recover in a day or two and have the implied volatility stay the same. So I wouldn't expect that sort of result if I were you.
  3. My options do not expire until December and January. So I have time. Last week was harsh though.
  4. You sound relatively new to options. I could help you a bit more if you'd giveme some details about what options you've got and when you got them.


    What is the stock .... if you don't mind ... Someone here may be able to help if you lay it out there.

  6. Yea, new to options. Been with stocks for years. Testing thw waters with options on a few companies that have done well for me in the past.

    UPS - UPSAP - down .15 since purchased
    BIDU - BDQLD - down .75 since purchased
    GOOCW - down .25 since purchased
    KDULS - down 1.55 since purchased
    ANFAQ - down 1.15 since purchased

    The other ten or so are positive.
  7. I'll give you my take on each of these from here:

    UPS: Bullish on this means bearish on oil which from where I stand doesn't seem too likely over the long haul. Also, very strong resistance at $76 which will put your calls at about 0.75 for a quick exit. That should please you as you would have about 50% return.

    BIDU: Resistance at 90 likely. You'll prob not recoup the loss on this one, but depending on how much you need the money it might serve better as a lotto ticket hold. You got killed by both the direction and the vol crush. Holding it through an ER like that was a lotto ticket play to begin with.

    GOOG: If it gets back up toward previous highs at 490 by the end of the week I would set a 0.20 trailing stop. That'll be a price of about $1.8 on your calls. If it doesn't break through then you're gonna have a hard time with this one.

    SHLD: I'm predicting a head and shoulders pattern here unless you get some significant help from the market rally. SHLD loves using the 20SMA as s/r and right now it would likely be resistance. I'd close it out.

    ANF: Same story as SHLD, retail has a long way to fall if it starts to go, but a very short climb before running into resistance. I'd close this out. The only thingthat is going to bail you out is a big market rally.