Fuchi,
maybe I didn't make my point clear. This was NOT A MENU of choices. In fact, it was a "BEAR SPREAD with CALLS plus 1 LOT PUT", a combined position. You have to execute all deals 1) AND 2) AND 3). These are not choices but a cumulation, designed to
let You achieve the following goals all at once:
1) not paying Premium for Position (check it !) (unlike when you just bought a put)
2) shouldn't turn to LOSS when stock MSFT just remained flat (around 95 $)
3) should reduce downside RISK
For each lot of position (all Options due APRIL)
1) Buy a CALL MSFT 110 or 120 (should be really cheap around $ 1/4 to 1/2)
2) SELL a CALL MSFT 95 at the Money (MSFT quote ?) -> GET PREMIUM should get you $ 6 at least
3) Buy a PUT MSFT a bit out of the Money (80, 85 or 90 but close, p.e. MSFT APR 90 for approx. $ 1/2 to $ 1
The contracts of 1) 2) 3) should be same size, 10 for example.
Remember, all three deals AT ONCE. This is technically called a "BEAR SPREAD with CALLS plus a PUT".
In this way You
1) Achieve a (albeit small) profit if MSFT stayed flat @ 95 -> $4000 with 10 lot each
2) Reduce downside risk (over a naked call writing) to the MAXIMUM theoretical LOSS -> approx. $ 20500 in this example (10 lot each), if MSFT jumped over $ 120 (lower loss in MSFT range $ 99 to 120)
if you bought the MSFT 120 protective call and sold the CALL 95.
It would be approx. $ 11000 if you bought the MSFT 110 protective call and sold the CALL 95
3) Provide Maximum Profit if MSFT theoretical go bust of -> $ 94500 if MSFT stock went to Zero,
IF MSFT fell to $ 85 You would gain approx. -> $ 14500 with this combined position long Put APR 90, short CALL APR 95, long CALL APR 120.
Regarding your long Intel puts, sell them around April 2nd but definitely before they annonce their quarterly earnings <G>
Greetings,
CROSSY |
