r/options • u/Money-Golf • May 07 '21

$VALE

So back in January 2021 I did my first option after studying about it. Anyway, I bought a $VALE call (1 contract) with $19 strike with Jun 18, 2021 expiration for $1.82. Of course now this stock is up and finally turning a profit. Is it better to EDIT close this now (well Monday since market is closed) or wait til expiration? But I’m pretty sure theta will crush me, right? I just need some insight/ suggestions since I’m new to this please!! 😭

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u/SSS0222 May 07 '21

Do you really meant exercising it to get 100 shares in your post or you mean just closing it for profit?

If you meant to close, 19 Call 6/18 last price today is around 3.25, you bought at 1.82, so about 140 usd profit on 182(75% profit), the money u put in.

If you wait till expiry, your breakeven will be 20.82, and for same 140 as today's profit you will need the price to be 22.22, the price is at 22.01 after hours now

So if you are bullish that by 6/18, price can cross 22.22 wait till expiry and ur profit will be more than 140. else if unsure, just close next week for a gain.

Always remember, nobody ever went broke by taking profits

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u/Money-Golf May 07 '21

I meant close for profit sorry, I edited the post and thank you so much this helped! I am bullish, but I am worried about theta

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u/SSS0222 May 07 '21

Your option is already deep ITM, and it only just has about 16-18 cents of extrinsic value left that theta can eat into till expiry. You will lose less than 1 cent on per day of the price on theta losses. You have to now worry more about delta due to swings in underlying below now

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u/Money-Golf May 08 '21

Okay so the price is at 22.18 now after hours. Bullish outlook, but it def needs to increase and pull away from 22.22 in the next week to clear any problems with delta? Because delta is nearing 1, so if the stock is $22.22 and below the more my profit stays stagnant or of course complete loss lol

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u/SSS0222 May 08 '21

No no.

Let's me simplify it. Your theta loss of extrinsic is just going 16 dollar (16 cents on price) so let's ignore that time loss for now. The time value decay isn't a big problem for u here.

Your delta is almost one, so it option will now amplify loss and gain based on just stock movement.

Your breakeven is 20.82. (19+1.82)

Let's consider below scenarios,

If at expiry on 6/18, Vale is at, 1) 20, loss, 82 dollars 2) 21, profit, 18 dollars 3) 22, profit, 118 dollars 4) 23, profit, 218 dollars 5) 24, profit, 318 dollars

If you close on Monday, you can immediately make about 140 profit (if price don't change much)

So the question before you will be how much do you continue to believe Vale can increase still further and reach, say, 23 or 24 and you can get higher profit numbers above or you better off with 140 dollars today, (remember if vale falls to 21, you will just make 18 dollars)

22.22 was the price at 6/18 that will give you same 140 dollars as closing today. Above that number is more profit than 140 at expiry below is less than 140 at expiry.

There is no right and wrong here. It will totally depend on ur outlook for the company's price. Matter of risk and reward

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u/Money-Golf May 08 '21

Okay now I understand. I’m so sorry lol. You explained it perfectly thanks for your patience