/biz/ - Business & Finance

>>50262016
>>50261620
There now that I had a chance to sit down, let me explain it.
Why did you buy options instead of long shares? You wanted leverage, more efficient use of capital. So you took on the risk that your principal would potentially be wasted. Fine.
You took the furthest dated options, which is a good idea, but you got them OTM, which is not a good idea. As theta decay hits, your contracts will lose value. Even if the contracts expire ITM, you will stuff suffer a loss unless they reach above $18.30 a share - and that's just to break even. Normally when doing leaps, you buy deep ITM options so that even if you get it wrong, you can roll the contracts to keep some of your capital.

Secondly, look at your greeks. Every $1 in SIGA means a move of +/- $989 of contract value. Every day you lose $21 due to theta. You're also long gamma and vega, but volatility is quite high - it's mean-reverting, meaning you will also get hit with IV crush. What happens if it reaches $15, and then crabs for 3 months? Volatility will drop and you still lose.
Look at the spread I provided. You sell puts ATM and buy calls ATM. You use the credit from the puts to offset the cost of the calls. You now have a delta of $1700 per $1 movement, only lose $2 a day, and vega exposure is greatly reduced. You don't care how volatile the stock is. This spread also cost half of the position you entered.

The catch? If the price drops, you might get assigned, forcing you to have the money onhand to buy the shares directly (you were bullish anyways). You also have negative gamma, which can be risky if the stock moves sharply up or down in a given day (+/- 25% or something)