Option Investor


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As we go into the last day of the April expiration. It has been easy for a lot of our positions, but extremely frustrating for several like PRU, KLAC, XLB and CRDN

We have closed out both PRU and KLAC, so we only have to deal with XLB and CRDN

Going into tomorrow, as always, you need to be sure that any position that may

go into the money that you do not expect to would need to be closed out.

Issues to keep an eye on

Currently the issues that fit that scenario might be AMGN and DDM, however we still have several points of wiggle run on these positions, so they should not be a major concern, unless we get a rally like yesterday, then we might have to deal with DDM.

General CAVEAT

But in general, be sure to close out any position on Friday that looks like it is going to finish in the money just before close, if not you will be exercised or assigned, depending on if the position is a put or call.

Specific Issues:

XLB ? This issue looks like it is going to close above $42. If it does you need to close out the APRIL 42 call at the close at the latest. Of course we also have a XLB put spread that is currently over $2.50 out of the money, which would expire if we needed to close out the $42 short ( which is the more likely scenario.)

Best scenario: If XLB would close between $41 - $42 both the put and call sides would expire. However, we would need a little correction in XLB for that to happen tomorrow, so I am expecting we will have to close out the call side before the close.

Finally, in regards to XLB: There is a chance that the issue could drop under $41 tomorrow (not at all very likely, but we know this market by now) it could happen. If that should happen, then you would have to close out the $41 short put and the $42 short call would expire. One of the sides will expire and the other will have to be closed out unless XLB closes between $41 - $42

CRDN - This issue faces a similar situation except either the call or the put side will have to be closed out tomorrow at least right before the close, If CRDN closes above $32.50 you will have to close out the call side, If CRDN closes above $35 you will have to close out both positions on the call side the short $32.50 and the long $35,but only if CRDN closes above $35. The more logical scenario would be CRDN closing somewhere less then $35 and you just close out the short $32.50 APR call. If that should happen of course the short $32.50 put and the long $30 put would expire worthless.

Finally, if CRDN drops under $32.50, you would then close out the $32.50 put, as the short $32.50 put option would then be in the money, and of course the APR $32.50 CRDN call would then expire. Either way the bottom line is that you will have to close either the $32.50 call or the $32.50 put out tomorrow. The long $35 call would only come into play if the stock closes above $35 and the Long $30 put would only come into play if the stock closes below $30. (These last two scenarios are hopefully and more probably the less likely of the scenarios.)

Of course you may close out the CRDN or XLB positions anytime tomorrow that you desire, but remember the closer to expiration the less time premium is involved

Until late tomorrow

ADDITIONAL MAY RECOMMENDATIONS will continue over the weekend

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