For those that follow the Fab 5 basket of stocks, you will know that one of the current positions is in $HAIN. Yesterday I elected to exit the long stock piece as I was not comfortable with the recent price action but still wanted to participate in a “safer” way.
Here is the adjustment I made:
As noted I sold the long stock piece. I then had to Buy to Close the short Calls that I had sold against the stock (February 90 Calls). The next step – to be able to still participate – was to Buy to Open the March 90/95 Call Spread. This adjustment lowered my Options Net to $3.35 but the key element to this trade is: Risk was defined.
The reaction? Price is down near $81 so a drop of over 10%. The Call Spread will have to do some real work by March expiration to have any value but more importantly this adjustment did its job: no downside risk in case the market said “we are Bearish, down we go”.
So be it.