I have long stock position in $XONE in the long-term account that includes a February 60/55 Collar. A few questions this week about when – if at all – to take this trade-off given the continued stock weakness.
First, a look at the trade activity since beginning a position on 9/6/2013:
Above is a look at some information from my trading journal. The current long stock entry is $55 (from a Buy Stop on 12/24). The latest Option adjustment was on 01/17 to create the February 60/55 Collar. I have an Options Net of $22.20 so quite a cushion to work with.
One of the common steps I take when I am in this situation – long stock with a Collar & price has fallen – is to create a Bear Risk Reversal. To do this I simply sell (or Stop out) the underlying stock and the Collar becomes a BRR naturally.
The reason I chose not to do this in this case was:
1) The position is in the long-term account
2) The Puts are doing their job, protecting the long stock piece
3) The stock is expected to be volatile so I don’t want to keep exiting and re-entering (over-trading it)
4) The size of Options Net is substantial so my cost basis is sub-$35
A look at the Daily chart: