r/options
Need help understanding LEAP exit points
Author holds MU LEAPS expecting $100-$120 but worries about IV crush and optimal exit strategy around upcoming earnings.
- Expects MU stock to easily reach $100 or $120 before LEAP expiration.
- Believes underlying stock price will recover even if it dips post-earnings.
- Concerned about significant extrinsic value loss due to IV crush ahead of earnings.
- Worried that high extrinsic value might not be recoverable even if the stock price bounces back.
I have this DRAM LEAP for Jun 27. My guess is that it will easily surpass this and reach 100 or 120 plus before expiration date. The question is when do I sell. MU earning is coming and and am concerned that the IV will likely drop, incase their earnings arent stellar. I will lose alot of that extrinsic value but I know the underlying price will recover. But will I ever get back this high of an extrinsic value?
And lets say I hold through this earnings and the stock price drops to 60-70 eventually recovers back to 80. If the extrinsic value recovers to what it is now, is it worth holding the option til the etf price reaches 100 or 120, since it will find a support around the current price after the next dip. How much of that extrinsic value do I lose on and is it worth the increased base value of the option from stock price increase? Is there a delta/price/etf catalysts/trends combo I should be considering when planning to sell for maximum value(base+extrinsic)?
My other concern is the etf price blowing past 80 and never dips at the upcoming mu earnings incase they do well. Say it goes to 90 in the coming weeks. Is it worth holding trhough that. What delta level should I look out for in that scenario.