Wednesday, February 8, 2017

A short term Option Call Spread on $TSRO

In my last post, I discussed why it's better to use a long time frame when selling option spreads. In this point, I am going to show why I ignored that advice.

I sold a call spread on $TSRO today, selling this week's $185 for $3.47 and buying the $195 for $1.47, a $200 spread per option contract.  As usual when selling the spread, a pretty bad risk/reward ratio, 5 to 1 against.  If the stock goes to $195, I loss the entire amount.  Dumb, maybe.

Well, that's why the call it risk.  Yes, it's a potential loss, but a defined one, pretty much.  Is $TSRO going to $195?  It already jumped $20 today to $182 (it was $183 when I put the trade on.) 

The positive is that it doesn't have much time to go up.  The $20 jump today can be traced to a takeover rumor.  We will see if it has legs.  My play is that it doesn't and drops, or at least holds steady through Friday, two days away.  If I get a drop tomorrow, I'll close it early.

Probably more to discuss on this, but I want to get this posted, and chances are no one will read it anyone. 

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