Trading against yourself. What?

To illustrate what I mean by “trading against yourself” I will discuss the current Submarine Basket position that I have in $EBAY.

Here is the current trade:

  • I am long $EBAY at $49 (exercised weekly Calls last week)
  • I am short the December 6 Weekly 50 Calls (against stock)
  • I am long the December 6 Weekly 52.5/51.5 Put Spread (was short the 49 Puts as the other part of the short strangle)

This notion of trading against myself is really a choice to take advantage of the pop in pre-market (upgrade) and the expected pullback. Why? One key reason: I am capped by the weekly short Calls so I am not really participating in the pop anyway (at least not beyond the $51.41 level Рshort Call strike plus Option cushion). So, what I can do is use some of the Option cushion I had to buy the put spread and play the pullback << trade against my long stock, trade against myself.

 

One thought on “Trading against yourself. What?

  1. Update on this: the Put Spread is currently capped, the $1 gain is available as price is below the $51.5 level right now (below short strike of the PS).

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