Profit Taking or wait?
Its TGIF, for this long position $Apple(AAPL.US$ & $Tesla(TSLA.US$ with expiry on 0517. I’m waiting for market to open before I assess my position.
While waiting, thought to ask my friendly neighbourhood 🤖 to see its take on these option positions.
Below is what AI says:
Apple: Based on the details you’ve provided for your Apple call options:
1. Your diluted cost per contract is $3.60.
2. The current value of the call option is $5.85.
The option has increased in value significantly. With the expiration date approaching on May 17 and given the time decay (theta), here are some considerations:
• Time Decay (Theta): With only 36 days to expiry, the time value of the option will erode faster. If Apple’s stock price doesn’t continue to rise, time decay could start to eat into your profits.
• Intrinsic Value: Since the call option strike price is $175 and Apple’s stock is currently trading slightly above that, most of your option’s value is from its time value, not intrinsic value.
• Profit Taking: Given the significant increase from your cost basis, it might be prudent to realize some profits now, especially if the current price is beyond your initial profit target.
• Market Outlook: If you believe Apple’s stock will continue to rise, you may choose to hold. However, consider that sudden market downturns can erode profits quickly, especially as the option nears expiration.
Given the substantial gain already realized and the risks associated with holding an option close to expiration, it may be wise to consider selling at least part of the position to lock in profits. It’s also important to assess your risk tolerance and investment goals before making a decision.
1. Your diluted cost per contract is $3.60.
2. The current value of the call option is $5.85.
The option has increased in value significantly. With the expiration date approaching on May 17 and given the time decay (theta), here are some considerations:
• Time Decay (Theta): With only 36 days to expiry, the time value of the option will erode faster. If Apple’s stock price doesn’t continue to rise, time decay could start to eat into your profits.
• Intrinsic Value: Since the call option strike price is $175 and Apple’s stock is currently trading slightly above that, most of your option’s value is from its time value, not intrinsic value.
• Profit Taking: Given the significant increase from your cost basis, it might be prudent to realize some profits now, especially if the current price is beyond your initial profit target.
• Market Outlook: If you believe Apple’s stock will continue to rise, you may choose to hold. However, consider that sudden market downturns can erode profits quickly, especially as the option nears expiration.
Given the substantial gain already realized and the risks associated with holding an option close to expiration, it may be wise to consider selling at least part of the position to lock in profits. It’s also important to assess your risk tolerance and investment goals before making a decision.
Tesla: Tesla call options with a strike price of $200 expiring on May 17, 2024:
• Delta: The delta of 0.2408 suggests for every $1 increase in Tesla’s stock price, the value of the call option would increase by approximately $0.2408, or $24.08 for a standard contract of 100 shares.
• Gamma: A gamma of 0.0107 indicates that the delta will increase by 0.0107 for every $1 movement in the stock’s price.
• Theta: The theta of -0.1308 means the option’s value will decrease by approximately $0.1308 daily due to time decay, assuming all other factors remain constant.
• Vega: With a vega of 0.1709, if the implied volatility increases by 1%, the option’s value is expected to increase by $0.1709, and vice versa.
• Rho: The rho of 0.0378 indicates that for every 1% increase in interest rates, the value of the option would increase by $0.0378.
Since the options expire relatively soon and have a theta of -0.1308, time decay will start to have a more significant impact on the value of your options. If you expect Tesla’s stock to rise significantly before the expiration date, holding the options could be profitable. However, if the stock does not move above the strike price significantly or if the implied volatility decreases, the time decay could quickly erode your options’ value. It’s crucial to monitor these Greeks, alongside your expectations for Tesla’s stock performance, to decide on the optimal time to take profits or cut losses.
• Delta: The delta of 0.2408 suggests for every $1 increase in Tesla’s stock price, the value of the call option would increase by approximately $0.2408, or $24.08 for a standard contract of 100 shares.
• Gamma: A gamma of 0.0107 indicates that the delta will increase by 0.0107 for every $1 movement in the stock’s price.
• Theta: The theta of -0.1308 means the option’s value will decrease by approximately $0.1308 daily due to time decay, assuming all other factors remain constant.
• Vega: With a vega of 0.1709, if the implied volatility increases by 1%, the option’s value is expected to increase by $0.1709, and vice versa.
• Rho: The rho of 0.0378 indicates that for every 1% increase in interest rates, the value of the option would increase by $0.0378.
Since the options expire relatively soon and have a theta of -0.1308, time decay will start to have a more significant impact on the value of your options. If you expect Tesla’s stock to rise significantly before the expiration date, holding the options could be profitable. However, if the stock does not move above the strike price significantly or if the implied volatility decreases, the time decay could quickly erode your options’ value. It’s crucial to monitor these Greeks, alongside your expectations for Tesla’s stock performance, to decide on the optimal time to take profits or cut losses.
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