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Richard wrote:
>
> >Problem I have run into with this method is that options and future do
> >not expire on the same date. You are then faced with a decision to
> >liquidate both or hold onto the future (when it is profitabel) some
> >more?
> >John Ahaus
>
> True, but I think in most cases the problem is irrelevant.
>
> Some options expire about a month or so ahead of contract expiration and
> maybe a couple of weeks before FND when speculators should be thinking
> about rolling over.
>
> So at option expiration, one of three things has occured
>
> 1) Your position is extremely profitable. Congratulations! BUT..if you want
> to continue holding the position you'd have to be rolling it over soon
> anyway, in which case you could buy another option ("insurance policy") for
> that contract.
>
> 2) Your position is extremely unprofitable. Shouldn't you be thinking about
> whether this trade is dog meat? Wouldn't it be time to just get out and
> reevaluate your thinking on the next available contract? Oh, and
> congratulations...the option you purchased help absorb at least some of
> your losses.
>
> 3) Your position is roughly break even. Probably the worst outcome. You're
> not sure what's going on. Still, you've gotta be thinking about rolling
> over anyway if you want to continue holding the position.
>
> -RB
Hello All, Just another thought - If an option is very profitable and
the outlook is for trend to continue go ahead and roll over into a
futures contract. If, however, the option is a loser (or not producing)
why have you kept it so long?? Treat options a bit more like futures
contracts - if it doesn't make money within a reasonable amount of time
exit your option and keep your loss small. An option you bought for
$500 can almost always be sold for $250.
Just my opinion. Have a great day!
Eric Bramel
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