Actually, the most money I've ever made from it in a single trade was a short. I've made a little here and there going long, had every call I've ever bought expire worthless (which I'm sure is the fate of the Apr7.5's and Jul7.5's I've got now), and have slowly been bleeding my way down to a relatively small position in it.
This is the fate of something like 80% - 90% of options- -they expire worthless. Gotta make you wonder, eh? I rarely play them. This is OMD's fault and I'm going to send him a bill if it goes wrong. :-)
If you want to buy 'em, buy 'em. If you want to short 'em, short 'em. ('em being stocks.) Don't let the Oops! tion MM's get a chance to screw you.
It's busted through every conceivable support level and I can't imagine what could possibly salvage it now.
They put those there just to make you think you've got a chance. Didn't anybody tell you? :-)
Refresh my memory. What's a strangle?
A put and a call on the same security with the same expiration date but different strike prices.
Hey, it gets a LOT more exotic than that! :-)
More than you ever want to know about options:
investopedia.com
Dictionary at the bottom.
I had noticed yesterday that both the $5.00 March calls and $7.50 March puts had zero volatility premium in them. They were priced for the stock to close at $5.50 on expiration day. As if I were looking at the expiration-day prices.
Was scratching my head trying to figure out how I could profit from my belief that it would end up at least 50 cents above or 50 cents below that price ($5.50) but not end up right at that price.
OKaaaay.
SANM closed 5.25 in AH.
$7.50 March poots closed @2.19
$5.00 March calls closed @0.39
Assuming the option prices changed linearly with the stock price between a stock price of $5 and $10 (which wouldn't happen, of course), you can't lose (except, of course, that you have to pay commish, hah, hah!). From $5 to $7.44, the strangle would be worth $2.59. Above $7.44 (the current price of the stock plus the current price of the put), the value increases penny for penny. Since it will cost you $2.59 to but the strangle, this amounts to a bet that the stock price will exceed $7.44 before expiration. The call (guess what?) expires worthless if you make money.
This, of course, ignores the fact that they WILL find a way to screw you. :-)
Disclaimer: All of the above assumes you live in FantasyLand where markets are honest and the brokers and MMs are your buddies. If you live in the real world, all bets are off. |
