$10KP Review

Well there was a lot of activity yesterday and we need to have a clinic on entering and exiting positon because I see a lot of miscommunication here.

It’s very hard for me to go into great detail during the trading day but when we roll a position, like we did with Apple at 10:05 today, we should follow the same rules as when we enter a new one, which is to buy the calls first and set a sell-stop on the calls you want to sell.  I apologize to new members but please, if you don’t read back a month of posts and comments as is srongly recommended, at least read the entire K1 section as it’s not possible for me to go over strategy every time we make a trade, I have to assume you have done some homework…

So when we closed out the painful $165/180 spread (even if you are "rolling" you are still buying to close your caller and selling to close your own position) we effectively picked up a new position from scratch.  In my case, I ended up grabbing the $190s for $3.15 as I really didn’t think Apple would break $185.  There was no reason at all to sell the $180s right then as my timing was perfect and Apple flew up about 10 minutes later (and those of you who keep asking for Email alerts need to be aware that the typical delivery lag would kill these trades). 

I added more calls at 11:03 (the $185s at $5.90) and called the top at 12:01 (a little early) and that’s where I capped the new trade as well as the "roll" with a sell of the $180s at $9.75.  We are doing these plays to teach but, as I keep warning, they are very complex and not for everyone but if you can learn to manage a 4-part trade on a wild stock like this, your regular spreads will start looking very simple.

As to DELL – If we can get out with a small loss we should consider ourselves lucky at the open.  Our total risk (if completely wiped out) is $540 (net of 10 long calls and 8 short calls) so if we can get out for -$200 we should be thrilled as clearly this trade is not working!  At $300+ it’s a judgment call as the odds of improving ourselves by waiting start to outweigh the loss for sure so really I’ll be looking to clear the decks for no more than -$250 and, otherwise, I’d rather take a shot at repositioning by rolling down the Febs and waiting to sell on a bounce.  It’s possible we’ll get a really cheap (relatively) roll to the Feb $27.50s, a roll that would have cost $1.20 yesterday and should be less than .60 in the morning.  I’ll be more excited if I can get the roll to the $25s for less than $1.70, which is possible as the higer calls should hold value a litle better than the $25s, which will drop all of their intrinsic value at the bell.

So I suppose the way to play this is to offer $1.70 to roll 1/2 (5) of the calls as I have no desire to turn this into a $2K position in a $10KP and attempt to cancel 5 parts of the spread for as close to a .40 credit as we can get.  This is what you need to learn to do with all of your positions:  Plan, contingency plan, back-up plan, exit strategy.  There is always an option – you just have to find it!