Got an email today from an options trader in trouble.
Here’s the situation and what I told her:
Would Allen considering giving me a advice fix for my AAPL and GOOG calls? I have January 19, 2013
AAPL $665 bought for $42.41 now $9.90
GOOG $775 bought for $41.30 now $4.50
I sure would appreciate some advice!!
Before you read my answer, what would you do in this situation? Take a few minutes to come up with a couple strategies.
Here is how I responded:
Thats why i hardly buy options anymore.
if you dont think they are coming back, i would sell.
If you do think they will rally, you can sell current month options against them for the premium.
So on Aapl 665, Nov 630 calls are paying 2.22. Once those expire in 15 days you can sell next months, or even weeklies. But if the stock rallies above your sold option, you will have a double problem so dont let that happen.
That’s the only simple way to work it. There are more advanced ways to get some money back, but nothing will be able to get it all back unless the stock comes back up.
But you still have a couple months. The election might provide a boost to the markets, and both stocks especially apple have fallen so far I would probably just hang tight and not do anything. Check when apple earnings are. If they are before your expiration you should be a boost for that too. this earnings will have the numbers for the new iphone and ipad mini.
If you have been trading options for any length of time, you have probably been in a similar situation. What did you do about it? How would you handle this situation. Please share your experience by posting a comment.
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