Hi Markas! Welcome aboard. You make a great point.
I've looked at you ONSL strategy and am intrigued, but was wondering how you would find it superior to going long stock, selling the Dec25 or 30 calls, then stepping into a protective Sep20 or 22.5 long put position after a 2-4 pt run up and subsequently trading in and out of your put position for profit.
That all depends on how you define superior. For me, it's limiting my risk. I find it very risky to own naked stock. Especially one with negative earnings, trending down, and highly volatile.
Stepping in as you described would yield a higher return, but it also exposes me to significant downside risk if the position tanks upon entry. My straddle has lots of time value. So an immediate downturn will still leave me with most of my option premium. That gives me great flexibility to implement numerous repair strategies and exit with my sanity and capital in tact.
There are exceptions, of course. For example if I could latch onto a fundamentally sound stock caught in a channel I would feel much more comfortable with your suggestion. For example, IBM, LU, and AXP traded nicely between two price points for quite some time. If I were savy to this technique then, I could have literally made a fortune. Check out their charts!
Your point about a high cost of entry is vailid. And I am looking at ways to get in for less. But I have little or no risk, and the potential is to double in 60 days. So I justify the cost. |
