Comments on: The Lehman Offering: Time to Short? http://www.daxdesai.com/2008/04/01/short-lehman/ High Return Investing with Dax Sat, 22 Jan 2011 18:41:16 +0000 http://wordpress.org/?v=2.9 hourly 1 By: Dax Desai http://www.daxdesai.com/2008/04/01/short-lehman/comment-page-1/#comment- Dax Desai Thu, 03 Apr 2008 21:19:04 +0000 http://www.daxdesai.com/2008/04/01/short-lehman/#comment- No problem. It can be frustrating when you see your stock make that move you were expecting only to see a loss on your options. I learned this with $$$$ unfortunately always wondering what I did wrong. I did not truly understand what makes options move. Now that I do I can trade profitably consistently. No problem. It can be frustrating when you see your stock make that move you were expecting only to see a loss on your options. I learned this with $$$$ unfortunately always wondering what I did wrong. I did not truly understand what makes options move. Now that I do I can trade profitably consistently.

]]> By: Thom http://www.daxdesai.com/2008/04/01/short-lehman/comment-page-1/#comment- Thom Thu, 03 Apr 2008 20:33:53 +0000 http://www.daxdesai.com/2008/04/01/short-lehman/#comment- Ahh, I see. I didn't even think about implied volatility affecting the options price. Little by little I'm learning more about options. If the stock had moved past the strike price, you could exercise the option and then this change in price of the option wouldn't affect your profit right?? It's only if you intend to resell the option itself that changes in its price matter. So it's almost analogous to holding a bond until maturity in that any changes in price along the way would be irrelevant. (It's a crude, incomplete analogy but it makes a little sense in my head) Thanks for explaining your Lehman rationale. Ahh, I see. I didn’t even think about implied volatility affecting the options price. Little by little I’m learning more about options.

If the stock had moved past the strike price, you could exercise the option and then this change in price of the option wouldn’t affect your profit right?? It’s only if you intend to resell the option itself that changes in its price matter. So it’s almost analogous to holding a bond until maturity in that any changes in price along the way would be irrelevant. (It’s a crude, incomplete analogy but it makes a little sense in my head)

Thanks for explaining your Lehman rationale.

]]> By: Dax Desai http://www.daxdesai.com/2008/04/01/short-lehman/comment-page-1/#comment- Dax Desai Thu, 03 Apr 2008 16:47:28 +0000 http://www.daxdesai.com/2008/04/01/short-lehman/#comment- Thom - Right or wrong, my opinion is that the options are extremely expensive for Lehman. If the stock does move, but the volatility drops then you could still lose money on your puts. That is why I recommend shorting the stock directly. I see some risk of the volatility coming back down. Again - It may not be the best advice, but it has happened to me before so I a get antsy when I see volatility spike so high for a stock. You'd like to be there somewhere as the volatility goes up making your option value rise as opposed to buying at a volatility peak (which I suspect is the case). Thom – Right or wrong, my opinion is that the options are extremely expensive for Lehman. If the stock does move, but the volatility drops then you could still lose money on your puts. That is why I recommend shorting the stock directly. I see some risk of the volatility coming back down.

Again – It may not be the best advice, but it has happened to me before so I a get antsy when I see volatility spike so high for a stock. You’d like to be there somewhere as the volatility goes up making your option value rise as opposed to buying at a volatility peak (which I suspect is the case).

]]> By: Thom http://www.daxdesai.com/2008/04/01/short-lehman/comment-page-1/#comment- Thom Wed, 02 Apr 2008 02:54:58 +0000 http://www.daxdesai.com/2008/04/01/short-lehman/#comment- "The options implied volatility is extremely high so if you’re going to bet against it you would be better off shorting the stock directly and not through options." Can you explain why it is better to short than use options? If it's extremely volatile, it seems to me that options would limit your risk and offer potentially greater gains. “The options implied volatility is extremely high so if you’re going to bet against it you would be better off shorting the stock directly and not through options.”

Can you explain why it is better to short than use options? If it’s extremely volatile, it seems to me that options would limit your risk and offer potentially greater gains.

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