Crowdsourcing my exit in Priceline

I am going to give you folks a chance to put together an exit plan for the remaining pieces of a Bear Risk Reversal that I put on $PCLN last week. For those that are not aware, this is a Bearish bet to the downside. Here are the trade specifics:

  • Long the May 700 Put at $28
  • Short the May 720 Call at $37

This trade was for a $9 credit on 4/19/2012. What I have done so far:

  • Sold to Close 1/3 of the Put position for $43.00
  • Sold to Close the balance of the Put position for $41.00

What remains of the trade is the Short May 720 Call. I did add a Weekly 720 long Call position – to cover the May 720 Call – at 2.60 (cheap insurance this week). The weekly 720 Call currently has a bid/ask of 3.4/4.10 and the May 720 Call has a bid/ask of 28.3/28.9

I welcome your strategies, you have until 2PM CST today so give me your best shot.

Source: Option Trading Pedia

5 thoughts on “Crowdsourcing my exit in Priceline

  1. The way I see it, PCLN has more risk to the downside than upside for the rest of this week (given that it has made a 3.5% move today). You seem to have just the Calls and hence limited protection to the downside. If I were you I will book my profits for now or add a Weekly Put for protection.

  2. To recap here, I am short the May 720 Call in Priceline so any continued down move is GOOD for that position. The long weekly 720 Call was put in place to protect the short May 720 Call this week – cheap insurance for any “pop” – so if it expires worthless on Friday only the short May 720 Call will exist (and a bump up in risk I might add).

  3. Dumb question. Just re-read “exit” in the title. Anyways, some notes: the vol on the long weekly 720 call is rapidly declining while the may 720 call is remaining steady. Also, PCLN looks to be near the top of a declining trendline.

    It doesn’t seem like you mind letting the weekly expire worthless and since we are at a pivot level in PCLN, I would keep the long weeklies as a hedge until I see a decisive break higher or lower.

    Personally, I would take profits on the long calls on a break of daily VWAP & let the short calls run. On a break above today’s highs, I would close the entire position.

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