SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: tuck who wrote (11250)7/20/1999 12:09:00 PM
From: Herm  Read Replies (1) of 14162
 
As I write, the EDFY 12.5s PUT are @ 1 3/4 which is a 3/8s gain in
value over what you paid for them. PUTs are like deductibles on your
car insurance. The higher the deductible (lower PUTs strike price)
the cheaper the downstroke.

I noticed that the 20-day volatility is at 71.7%. So, a delta of .45%
of 71.7% is 32.27% net change for your PUT which comes out to approx.
a fair value of 1.82 plus you add a spread for the MMs. Pretty close
to the fair price Tuck. You do have a profit. The way to increase the hedge is to buy more PUTs than the number of CCs you are holding. That compensates for the lower deltas that you have to overcome!

You have taught me something Tuck. I just learned how to calculate
the potential price moves and the PUTs value from my data info at
www.stocksmartpro. That is where I read the 20-day volatility value.

Now, Tuck! A 3/8s gain in your PUTs is a .27% gain on your original 1
3/8s downstroke which came from your CCs, right? :-) You still
have some good time remaining on the PUTs. It still sounds like cheap
insurance to me. Just imagine if EDFY tanked big time? You would be
dead. Remember risk vs. reward balance.

SideShow PUTs Formula

I was trying to come up with a formula to calculate the # of PUTs needed to cover 100% of loss value in your portfolio by a drop. I know I have seen it in my books. Does anyone have it?
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News