A short term breakout position for BBRY currently in play. I'm long the $10.50, $9.50, $8.50 butterfly (long straddle/short strandgle version). Earnings out Friday - I think the stock will breakout lower but I've left it open for some return if BBRY breaks out to the upside.
26th March, 2015
After a soft openning, BBRY made some small gains during Thursday's session to end the day up slightly, closing out at $9.30 (+0.22). The butterfly has lost a little value from yesterday, showing an unrealised loss of -$6.
27th March, 2015
Pretty lame result after the earnings announcement from BBRY left the market relatively unchanged. But, I am now short the stock as I was auto-exercised on the long $9.50 puts...
30th March, 2015
Sold two $9.50 puts, which were filled at 0.22 but the stock is down 6.98% - wish I'd not sold those puts now.
2nd April, 2015
BBRY closed $9.34, which means the puts are ITM. I was exercised on the puts, buying the stock at $9.50, which closed out my short position of BBRY stock.
Using the Delta to Hedge Options
Delta measures the theoretical change to the value of an option as the underlying changes. This means the option's value is tied to the underlying by the amount of "delta" the option theoretically has. Traders can then offset the risk of the opiton by trading an appropriate amount of shares in the underlying security
Pricing Options with the Binomial Model
The Binomial Model is the model of choice for American styled options - that is, those options where you can exercise any time up until the expiration date. Even though Black and Scholes was the original option pricing model, the Binomial Model is probably more widely used than B&S.
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