17 aug - we all know where facebook is at now because cnbc tells us everyday.. i still like this trade, ratio spreads are great at getting some of a loss back.. thing about ratios is that you do not have to just let is sit there if you see it will be out of the money.. you can close it and roll it down and try to catch that bounce lower.. surprised dan did not do this. still would not have gone so far out.. regardless this will be marked down as a max loss despite liking the setup.
-----------------------------------------------------------------------------------------------------------------------------
22jun - options action revisited this Facebook trade on show,heres the clip
facebook clip the most agrevating segment of the show for me. same comments as i had below..the overdramatic, "your shares could get called away, bye bye profits" crap. didnt they review the thesis as to why dan entered this trade..its essentially a trade repair because you got your precious 1000 shares from the IPO at 38 and have a paper loss. you see how slick they are and try to fool the viewers with the stats. dan put this trade on with stock just under 30, so graphic today shows stock is up "only" 20%..so on your 1000shares your up about $3000 from entry. then they show this ratio spread is up 400%..yeah sure..you put on a trade repair for 10cents and now its 40cents..so you are up $300 out of a max $4000 if pins at 34 in aug. if you are putting on ratio spreads without underlying stock/leaps you are a moron and will soon be parted from your money. again, wapner misleading about the profit potential "if stock can settle under 34 then dan can make an additional 3.50... some viewers will take that as ANYWHERE under 34 and you can make 3.50 more..nope..that max profit is at a 34 pin. tricky tricky cnbc. scott adds his usual useless comments "you have to watch where you are with the stock?" come on, thats it, thats your expert on-air advice?? note mikes comments "you difenately need to let this thing go, it takes a while to maximize their value, no question about it".. ok good advice..ratios only get near max profit near opex..thats why i only do front month ratios vs having to wait 3months to get money back. Enis concurs to leave it on. scott is way off base.. "the goal was to get out of facebook" WTF is that? wrong, the goal is to get your money back. he says "you have made a bunch of your money back, dont be a pig"..really.. that 30cents the trade as appreciated? that bunch? ok. so we dont want the facts getting in the way of some air time.. you got shares at IPO for 38, it dropped big, was at 29ish at time of trade, now its at 33 and you made .30cents on the ratio..yep.. thats a sweet trade..getting out of facebook with $5000 loss vs hanging tight and potentially getting more of that back as ratio moves in your favor..really poor advice. no wonder his track record is poor. but wait, im not done yet, then Mike says this crazy shit in the "final trade" segment,
final trade . "i think you take the trade off if the stock reverses", just 5minutes prior mike said to leave it on because it takes time to maximize profits" , so if stock pulls back some what does that have to do with a ratio spread that doesnt get really profitable till august? defeats the whole point of buying a ratio spread... really terrible segments from mike and scott today. not helpful at all to inexperienced viewers.
click-->
to follow on twitter
-------------------------------------------------------------------------------------------------------------------------------------
31may - dan has a trade repair on the show if you are long Facebook, here is the video clip..Facebook comments start about halfway thru
video clip.. i had a similar suggestion few days prior
Mark's Facebook Suggestion .
buy the Aug 30/34 call ratio spread (buy one 30, sell two 34's) for .10 per 1x2
the thesis is you are long the stock from higher. not entirely accurate the way dan phrased it in video that "if stock is above 30.10, I can make up to $3.90"..thats not accurate. more accurate phrase would be "this ratio spread starts to make money above 30.10". You only make that $3.90 profit if stock pins at 34 at opex, from 34 to 38 the profit starts to trail off. I'm sure some newbies thought, sweet, i will make $3.90 if its above 30.10.
Also overemphasized the "stock could get called away" part of this. very overdramatic. while technically correct, you could have your stock get called away at 34 IF YOU DO NOTHING AT OPEX.. got that part??? to not get called away, you can take some action.. such as take profits on the ratio spread, roll it to the next month, close it and sell short calls the next month... several things you can do..you dont have to just sit there like a dummy with stock at 34.50 on last day of opex, biting your fingernails hoping it drops below 34 to keep your stock.
so if stock pins at 38 on opex..your stock has recovered all the way back to the IPO price and the ratio is worth zero.. so you could close out the ratio near zero..no harm no foul, and put on new trade for next month.
not mentioned is that this ratio spread will not realize the full profits until right near the opex. I like the concept of the trade but i would do my suggested trade instead which puts on a similar ratio spread but for July first
Dans on-air trades in a
google docs spreadsheet
