> That's wrong. The options had an actual price. Granted, it was a low price, Cooperman bought them back at an average of $0.07, having sold for $1.32.
He's not wrong, he was pointing out that almost all the potential profit had been realized, but there was still a way to lose it all. With numbers: they already made 95% of possible profit, but were able to lose 100%. It makes sense to close a position like that out and is indeed commonplace. Most shops don't like that type of negative asymmetric risk.
However, what they didn't do is roll them forward to keep the short position, that's also a common technique.
Matt certainly was wrong when he said: you can only lose money. I pointed out that Cooperman could have made a potential additional $0.07 if the options expired, and you're agreeing with that.
I agree with you that it usually makes sense to close out or roll an asymmetric position. BUT, and this is an important BUT, holding a position to expiration is far from rare.
Here are some statistics (but I can't vouch for their accuracy)[1]:
10% of options are exercised
55% to 60% of options positions are closed out (bought back)
30% to 35% expire worthless
Option expiration shouldn't be glossed over. That final case occurs one-third of the time.
He's not wrong, he was pointing out that almost all the potential profit had been realized, but there was still a way to lose it all. With numbers: they already made 95% of possible profit, but were able to lose 100%. It makes sense to close a position like that out and is indeed commonplace. Most shops don't like that type of negative asymmetric risk.
However, what they didn't do is roll them forward to keep the short position, that's also a common technique.