Tom - are you in a spread or do you just own the 47.5s and 50s?
If you just own them, you can (if you're approved at level III options trading) complete a bull spread by selling to open calls at a higher strike, e.g. 55s or 60s (thought the latter don't have too much value). This reduces your overall exposure by paying you the money for the sold calls, which offsets the cost of the purchased calls. You sell up to as many calls as you've bought, at higher strikes.
- Called a bull spread. I did this a week ago, selling Nov. 55s against my Nov. 47.5s, reducing my breakeven point (at which I make money) at expiration to 48.5 - I make money if the stock ends above that at expiration.
With a spread, you must monitor to buy back the sold portion of the spread while there's still a little time value left in it, if the sold calls are "in the money". Otherwise, you risk assignment, and have to
buy the stock to sell it to the assignee, who bought your call.
You also cap your maximum profits at the spread itself - in my case, I'm limited to $750 per contract - the 7.5 dollar difference between 47.5 and 55. So if AGPH obeys John W, as well all hope it does, then I won't make any more than if it peters out at 55 or so. Thats the risk reward trade off. Luckily, I own calls with expirations further out, so I will continue to benefit from a rising price.
Hope it helps,
Randy |
