Or Not To Pin

• Posted by Adam Warner
• on January 14th, 2010

In lieu of this month’s pin rundown I present …..yesterday’s move in BIDU.

Want an abject lesson in not gaming pins too early? Well here it it. Not that BIDU would ever rank high on a list of pin gaming as the open interest never gets all that high, nor is volatility particularly low. But it’s not like this is the only stock to ever have a big move out of the blue off news no one could see coming.

So look at it this way. You’ll clearly rake in higher premiums the earlier in the week you sell. But catch just one move in your face like this one, and you’ll probably throw away a year’s worth of plays. To me it’s just not worth it. Wait until Friday and of course you get way lower premium. But by then it’s clear which strike is in play, and it’s much easier to just stop out if you’re wrong. Not to mention you don’t have the gap risk of an overnight.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus