How to get out if you are stuck with an option at a higher price...

I often wondered how helpless one feels when u are stuck with an option at a higher price. Very little can be achieved by praying and hoping against hope.

Like a friend of mine bought 3500 CE at 99. We were having a discussion on how he plans to recover the money. it is trading at 55 at the end of the day.

If tomorrow, we dont close above 3420, then it'll become tougher to recover the money.

If we dont want to book losses....what are the alternatives...

any suggestions...

That is adjusting a option trade that most of Option traders are always tempted to do cause options give us that flexibility.

In my practice, I try to adjust profitable option trade so that I lock in profit or improve the returns without increasing risk.
Adjusting loosing trade is not that I practice for following reasons:
1) It reinforces the behaviour that u can have a loosing option trade and adjust it later
2) I am getting emotionally attached to my loosing trade.. infact, falling in love with this and trying to mend it.
3) Had it been a stock/future trade, where I have not choice of adjustment, my stop would have got me out of this trade by now, so why not here.
4) If I take the loss here, then I have more flexibility to find a winning trade and there is no constraint to play around with 3500 CE. I might get only second grade opportunity with 3500 CE.

So, I will book the loss and move on.
Even otherwise, From last 2 days, 3500 is turning out to be a strong resistence.
Holding Long Call at resistence level is what novice traders do. Resistence is the place to go Long Put or Short Call.. not the otherway.

Happy Trading.

To adjust above Long Call 3500 (Assuming april expiry),
- I might go for creating calender spread by selling 3500 May call..
- Create bearish vertical spread by selling April 3400 call. This will only reduce the loss as 3400 call will not fetch sufficient money.

Creating multi-legged strategy is bit too complicated for me to handle, otherwise, you can also create 3400 butterfly.. which will have short 2 3400 call, and long 1 3300 call and long 1 3500 call. As 3500 call is still there, u just need to open other 2 legs.
Can also try out ratio backspread strategy.. by selling higher numbers of 3400 calls.

Hope this helps.
Happy trading.

problem with most new options traders is they treat it like a get rich quick scheme. Most target profit of over 20-100% and if they are lucky, they end with minor bruises.

i would've sold may 3500 (calender spread) or april 3550 (call spread) to provide sufficient room for recovering.

today, i feel bearish about the market and expect it to go to 3250 levels. As a closing strategy, i bought the 3300 PE April for 63 and for insurance i sold 3200 PE at 36.

would any other strategy be better if one is bearish in the short term. would a bearish call spread (shorting 3300 CE at 147 and buying 3500 CE at 52) pay me more dividend.

another alternative i can think of, in hind sight, is a bear put spread (buying 3500 PE at 170 and shorting 3300 PE at 70).

i am new in option trading.i have buy 3500call@47 on friday closing. previously i have made profit by buying 3500@69 friday mornning and sell it at 110rs at closing. now what should do with this 3500CE on monday..


plz also suggest low brokerage house for option..........indiabulls charge 260inr
for 3500pe(buy or sell in intra day)......

first of all. dont buy options in the last 10 trading sessions. chances of losing money goes very high. advisable, book losses at the end of the day. or incase it goes against you, sell the higher strike price. or sell the next months options...

in ur case, if reliance results give a positive boost, we might break the 3095- 3014 supply zone. and provide u with an exit for ur current month.
incase the results has a negative impact, i think selling the "3500 call may" will give u a decent exit....