Author Topic: Using options in a bull market with core stock positions?  (Read 2410 times)

scorpioncapital

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Re: Using options in a bull market with core stock positions?
« Reply #10 on: October 23, 2017, 01:51:38 AM »
I like the idea of writing off a call premium. It usually is far smaller then the gross value of the position you are liquidating .


sarganaga

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Re: Using options in a bull market with core stock positions?
« Reply #11 on: October 23, 2017, 12:55:05 PM »
Glad you appreciate it. Just wondering: you own an overvalued stock in a bull market and you want to sell it slowly but keep the upside because it might go higher. I'd say the important question is not: how do I implement this strategy with derivatives but: is this a sensible strategy? What's wrong with simply selling?
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I strongly agree with the above. If you want to lighten a position, just do it. If you want to buy it back later on, do that.

Unless you have reason to believe you have some sort of edge in trading the options, selling really looks like the much better choice. In these days of low volatility and markets which slope gently upward, options trading has looked pretty benign from a risk standpoint. But, like G K Chesterton opined, the wildness lies in wait.
GE is a good recent example.

scorpioncapital

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Re: Using options in a bull market with core stock positions?
« Reply #12 on: October 23, 2017, 01:38:09 PM »
I just see options as a deal when you suspect something is overvalued but it could still double because
a) markets are crazy bullish or
b) you are , in fact wrong on the upside, in your valuation.

The loss is far less if you sell at this guesstimate of overvaluation and then lose 1/10th on an option position.