(2)contractsVSCAE and (1)contractFLRAQ Jan 09
Purchased (2-contracts) VSCAE which split 2for1 and( 1-contract) FLRAQ both due to expire Jan. 09.

Original costs:VSCAE-2 contracts 96.60 or 19,320.00 total.

FLRAQ-1 contract 105.00 or 10,500.00total.

My opinion,buy the the stocks even though I,m in the hole.

Both stocks have split since I bought the contracts.I,m out of the money a ton!  However the stock price of both stocks are above my strike price when you consider the stock splits.I am thinking of buying the stocks.

Your opinion and advice.



The price you paid is completely immaterial.  It has no bearing on what you should do now.  Neither does the fact that the stocks have split.

1) The whole point of buying options is to limit risk.  It's not a good idea to buy options that are anywhere near $100 each.  I agree that it was better to own these options than stock, but it's a shame you lost so much.

2) Buying options that are at the money gives you a whole bunch of negative time decay, but, in return, potential losses are much smaller.  Is that a good trade-off for you?  I don't know the answer.  It's something each investor decides for himself.

3) I have no opinion on the stocks.  The truth is, I never have any idea on whether a stock is moving higher or lower.

4) You say you are 'OTM a ton.'  Then you say the 'stocks are above my strike price.'  Those are inconsistent.  I assume you mean your options are now out of the money and the strike price is above the stock price.  Your options appear to be worthless.

4) If you believe owning the shares is right for you, then go for it.  At this point it looks (to me) that it's a better solution than buying more options - especially if you are bullish.

Best regards,

Mark D. Wolfinger
The Rookie's Guide to Options:
The Beginner's Handbook of Trading Equity Options
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