I’m tracking a position of 12 December 145 puts @ 0.37. Yesterday’s finishing stroke looked like the beginning of a take-no-prisoners short-squeeze, but if Thursday begins with even a modest rally, it will reduce the puts to less than half of what we paid for them in a trice. Ordinarily, this is where I would bail out. But keep in mind that we are building an offsetting position using NFLX calls to straddle our bet, and they will more than cover the $450 cost of the puts if stocks rally into year’s end.
Rather than suggest that you stop yourselves out of the puts at, say, 0.18, my hunch is that DaScumballs will drop their bids for them so precipitously Thursday morning that we’ll probably regret not having bought more of them. Accordingly, I’ll suggest putting in a lowball, 0.11 bid for 50 more of them, good only for the first five minutes of the session. If stocks open sharply higher, don’t be surprised or disappointed if the puts go for 0.12 and we’re shut out, since that’s how DaBoyz play this game. If they let us in on the trade, it will only be because the market has opened strongly enough to make DaBoyz think they could steal the puts or 0.10 or less. Rather than let us take them all, they’ll match our bid, since paying 0.12 just to shut us out of the trade would be too high a price to pay. If you buy the puts for 0.11, offer half of them to close at 0.19 for the remainder of the day. _______ UPDATE (11:30 a.m.): Although the stock opened only a penny above the previous day’s closing price, the aforementioned Scumballs managed to shake down the puts to 0.22 on the opening rotation. To succeed at this skullduggery, they simply pulled their bids, allowing the puts they intended to steal to get dumped by pensioners, widows and orphans for whatever price those puts might fetch. To give you an idea of how bad the opening-bell shakedown was, the puts were 0.22 bid even after the stock subsequently rallied 70 cents to a so-far intraday high at 158.77. _______ UPDATE (November 18): We’ve effectively straddled our bet with bullish call spreads in NFLX that traders were advised to acquire last week. If you missed the opportunity, you should exit the DIA put spread at will. To simplify our profit/loss accounting, its cost will subtracted from any profit that we make on the NFLX spread.