Hi stock,
<<I think QQQQ could go up to 39 but it will reverse fast,>>
Yes, I agree.
<<if I hedge my position against long July calls which obviously limit my loss in case I am wrong >>
I rarely trade options anymore. You might ask Gush about this, I think he is a pretty active options trader.
But FWIW, I would not hedge a current short position that way. I would instead by contracts at the money or just out of the money, but with an expiration AT LEAST 6 months away, and preferably more like a year away.
That is because you are betting on a short term correction, medium/long term rally. That approach will allow you to capitalize on both, while still hedging your short position (though less effectively than with cheaper front month contracts).
If you hedge a short options position with July calls, then you stand a very high likelihood of losing on the calls if you are correct on the short position. And you would also be more likely to lose on both ends. For example,if the market rallies a bit more, takes its time pulling back, but pulls back too slow to make your puts profitable but too much to make your calls profitable also. I think that outcome is likely, in fact.
Longer expiration on the calls will be more likely to profit from the high likelihood (IMHO) that the long term uptrend is strong and intact, regardless of how much of a pullback we may see in the short-term.
....all IMHO, of course.
T |
