Hedging a short position before the market open

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DrStarsky

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Hi everyone,
I don't like being short in a stock overnight but I just did it. It must be a classic daytrader newbie mistake.

ASN opened with a big gap up on Friday. I made a nice little gain by shorting it after the open and covering it before noon. Then I shorted it again in the afternoon but something came up and I was unable to get out before the market close. So I'm short 500 shares and I'm worried about another jump up at the opening on Monday.

Is there a way I can get out or hedge this position? I guess market-on-open order but with a gap up it would do me no good. I don't see how I can buy a call option before the open either. Any other ideas?
 
Not really sure what you can do there, the company is trading on deal speculation, I guess this may be one of those rare occaisions where it's appropriate to hope. Maybe they deny the sellout rumour before the open, I would be carefull not to let that run away to far. Best of luck with it.
 
DrStarsky said:
Hi everyone,
I don't like being short in a stock overnight but I just did it. It must be a classic daytrader newbie mistake.

ASN opened with a big gap up on Friday. I made a nice little gain by shorting it after the open and covering it before noon. Then I shorted it again in the afternoon but something came up and I was unable to get out before the market close. So I'm short 500 shares and I'm worried about another jump up at the opening on Monday.

Is there a way I can get out or hedge this position? I guess market-on-open order but with a gap up it would do me no good. I don't see how I can buy a call option before the open either. Any other ideas?
Click to expand...

Very difficult to get out of this one ,,, The only technical advantage you have is that the market on Friday was OB which means it might gap down on Tuesday This might give you the chance to cover your position ,,, ASN was also upgraded and was one of the cramer's picks so you are in a very difficult position ,,

As you said , A beginner’s error but you will learn form your mistake which is valuable ,,
You cannot efficiently hedge against ASN because you donot know the volatility envelope for ASN ( because of the take over rumors ) .

SO keep your fingers crossed and good luck because you need that .

Grey1
 
Thanks for the reply, sounds like there isn't much I can do except be glued to the computer around the opening on Tuesday, right? Oh, and **** Cramer ;)
 
Well, I'm screwed. I only hope it will bounce down after the bell. I'm here ready with my finger on the trigger. How would you deal with this situation?
 
Sorry to see the stock gapping so much.

I would personally buy on open and move on - fwiw.


Good Luck.
 
Things learned from this:

1. make sure to read the news to know why there was a gap (I somehow thought
I read it was earnings)

2. never try to cover a position one minute before the close
 
DrStarsky said:
Things learned from this:

1. make sure to read the news to know why there was a gap (I somehow thought
I read it was earnings)

2. never try to cover a position one minute before the close
Click to expand...
If it's any help, I would add "Never, ever read the news and if you accidentally do pick up on any, purposefully ignore any attempt to judge what impact you think that news will have on the stock. Or if you really can't do that, at worst case, be totally counter-intuitive. Best option is to ignore the stock altogether".

Never try to cover a position close to the close, ever. If you're a daytrader, you're a daytrader. Apart from an option to play the last half-hour fun & games, you need to be flat before the end. That means knowing how much of each position you have left to unload, how much time you have left and how the momentum and direction is going on those stocks you hold. If you're new to this (I have no idea how long you've been doing this), practise with being in just one instrument at any one time.

Gaps and news really don't go well together.

It's already gone 5 points against you and I don't think you got out, did you. Don't wait. First rule.
 
Degrees,
thanks. Problem here is that something came up and I was away from the screen. Got back at last minute and tried to cover but couldn't. Also, I thought the gap was due to earnings. If I *had* read the news, I would have known it was a takeover bid and I would have made sure to close the position. But you make some very good points. I've only been doing this for a month, funny thing I was pretty profitable until now. I guess it was dumb luck. ASN still not moving.
 
I'm out. Degrees, I'm curious about one of the points you made: are you suggesting I could get out before the open? How? Thanks.
 
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