another option idea PLEASE POKE HOLES IN MY PLAN

[jdoe]

Lets say i buy 700 shares of NFLD and write 7 dec $15 calls at $1.70

at the same time i short 700 shares of NFLD (maybe on another site?)

if my NFLD gets called I cover my short, if the price of NFLD hits 16.70 I cover my short.

What could go wrong?

[jdoe]

would it be better to buy 1400 shares write 14 calls and close out my positions if the price drops to 12

very little risk with a $5000 possible gain.

[Scorpion Man]

Please stop trading options. It is just scary how little you understand what you are doing.

[DesertCat]

Don't the short and long positions offset each other completely? So now you have written a naked call option. If NFLD stays below $15, you make $1200. If NFLD goes to $20, you lose $2300. It goes to $25, you lose $5800. If it goes to $30 you lose $10k. So essentially your first proposal involves accepting a $1200 premium in exchange for a potentially unlimited upside loss.

Isn't NFLD close to announcing the results of a very important clinical trial? It appears the market is saying that NFLD will likely have a huge move when that happens, either down or up. That's why the options are so rich.

And your second idea is to take a $2400 premium with a covered call, so you profit all the way up to $15, and lock in a profit at any higher prices. You are thinking you can cover if NFLD drops to $12. But aren't NFLD's test results are likly to be released after market? What happens if NFLD reports bad results and opens the next day at $8? You just got creamed buddy.

[bet2win]

I dont know what you are thinking? why are you trading options and shorting stocks when you obviously have little idea what you are doing?

what is the point of buying stock and shorting the same stock? so you can give money away in brokerage?

obviously your account doesnt allow you to write naked calls/puts and you are trying to get around this.

The problem with trying to lock in small amounts of profit is that it only takes one time when you are wrong and a stock goes up or down a large amount and you lose a lot of money.

Here you can lose a lot if the stock goes well over $15 because you are capped at $15 with your CC options however your short stock is uncapped.

I'd suggest you stick to basic trading. If you think the stock is going to go up in the future then buy stock for the longterm.

If you think the stock is going to go up short term then buy a couple of calls.

If you think it is going to go down then buy a few puts.

Dont bother with trying to cover every scenario because you just waste your money in fees.

[mal_noles]

[ QUOTE ]
Please stop trading options. It is just scary how little you understand what you are doing.

[/ QUOTE ]

I couldnt agree more. Without a basic understanding of options theory or strategy just stick to buying or selling stock.

[mal_noles]

Wow I didnt even look at what company this was. DO NOT SELL OPTIONS IN A BIOTECH NAME, I really cant emphasize this enough. Without taking a look at the stock I am sure the implied vols look very enticing, there is a reason the market is pricing in a huge premium. Small cap biotechs that rely on one or two drugs can easily move 50%+ on any kind of significant announcement or FDA ruling.

OK so I just looked, the Jan20C are at 1.55 and the Dec12.5 straddle is trading at 5.20, something huge is going to happen in this company. People that know a lot more than you are pricing in a huge move.

[DesertCat]

[ QUOTE ]

SAN DIEGO (MarketWatch) -- The moral of the story of Northfield Laboratories is that no matter how hot a biotech story may be, in the end it's the science that counts.
The biotech company's stock tumbled 20% before Tuesday's close and another 50% in the after markets following its disclosure not only of disappointing preliminary late-stage test results, but that the results included "discrepancies."
Never mind the normal risks associated with biotech: The risk of disappointing results was high at Northfield (NFLD for the simple reason that since its founding in 1985, it has been working on a blood substitute -- a holy grail of biotech that has left a trail of stock-market blowups in its wake.


[/ QUOTE ]

$4.97 (down $6.50!) today.

[ QUOTE ]

And your second idea is to take a $2400 premium with a covered call, so you profit all the way up to $15, and lock in a profit at any higher prices. You are thinking you can cover if NFLD drops to $12. But aren't NFLD's test results are likly to be released after market? What happens if NFLD reports bad results and opens the next day at $8? You just got creamed buddy.

[/ QUOTE ]

I guess I wasn't pessimistic enough on this "plan". If he didn't get out yesterday, OP is down around $10,000 on plan #2.