gancho, I do not play options, so it is difficult to advise in this respect. It seems that at $2, you might as well take the loss completely. The reasoning is that if RMBS signs few additional licenses, the stock could rocket. I am not sure when the next IDF is, but it could be around the corner and another reason for bullishness. Right now, I am long the stock, but aware of the fact it has formed a major double top at $120 and of the fact that SOX broke an important neck in its own chart (neck of a double top head and shoulder, not very nice for the bullish scenario). In order to get $2 by expiration, the stock will have to be at $122, I think that is not very likely.
I doubt that your premium in the next week will decline much further, you may want to see if today was indeed the turn around or if we continue further down before you sell, and then see it rocket again. I would not expect to see RMBS much above $93 (short of license agreement) if a rally did develop, if that takes more than a week, the premium (the time element) will start and decline, so you must take this into account as well. I am sorry I cannot be more "definitive", but options are not my "game".
Zeev |
