[DcifrThs]

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If option grant A is above water at $20/share and grant B is above water at $22/share which should I sell first? I was thinking I should sell B first because then if the price drops to $22/share I would still be able to sell A for something.

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you should sell A first.

if the price stays above $22 for all your sales, you make the same amount of money regardless of the order you sell them in.

if the price is above $22 now and below $22 a year from now, you make more money by selling A now than by selling B now and A a year from now.

always sell the options with the lowest strike price first (if they have the same expiry date).

generally, if your options are just barely in the money and you have a long way to go until they expire, you should hold them. if they're well into the money, you should probably sell and diversify.


in general, if you're not worried about diversification and want to maximize your EV, you should hold them until just before they expire. holding onto them is similar to being in any other leveraged position, except you still have the chance to make money after your position goes underwater.

in other words, the options are worth more than the difference between the stock price and the strike price. that difference is greater the further you are from expiry, and the closer the stock price is to the strike price.

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generally this is correct.

but if you are exercising a tactical view, you have more than just stochastic modelling to go on, and the down probability of ending in a down state (in this case) is high enough that the ev lost by selling in time value is made up for in reduced intrinsic value if you view the stock as a loser.

alternatively, you could double up your view and sell the most ITM options and use some of the proceeds as margin to short the stock.

Barron