We have a short recommendation on LinkedIn ($LNKD) with a call to hedge the position.
On April 28th, I noted that I was going to stay short BUT hedge the short.
Therefore, we recommended to buy 1 May $124 Calls for each 100 shares. The cost of the call is $8.85. The call is at $1.73 today and LinkedIn has fallen with the market. We will wait until tomorrow to close.
We wanted to let you know that we have not forgotten about our position. Except to see an alert on what to do if you followed our recommendation. I have a couple other ideas I am working on that will weigh in on over the next few days.
The short was put on at $114.25 and the stock closed at $125.24 today so the loss is $10.99 or 9.62%. The option loss so far is $7.12 which takes the overall loss to $16.74 or 14.65%. Hopefully, we can get a pop in LinkedIn early close out the call and remain short as it drops into the close.
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I understand the theory of hedging, but I’ve rarely seen positive outcome thru execution. If a hedge doubles your loss, that just sounds like receipe for disaster.