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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe
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To: Mathemagician who wrote (16)8/11/2001 11:37:22 AM
From: Dan Duchardt   of 1064
 
M,

Is that figure created using a covered straddle write on 100 shares and a CC write on 200 shares? That would be (almost) the apples to apples comparison.

I think you are right that would be the closest to apples to apples, IF the covered strangle is backed by cash at the put strike in case of assignment. The rate of loss if the thing tanks would be higher for the covered strangle if you don't consider that cash to be part of the investment. This is comparable to the difference between a margined CC and one that is fully paid. If you only pay half the cost of the underlying, and all the losses come out of your half, that doubles your loss rate on the underlying.

Dan
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