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Strategies & Market Trends : Advanced Option Strategies

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To: tyc:> who wrote (268)	1/26/2000 11:12:00 AM
From: OX	Read Replies (2) of 355

buy stock, write straddle example not the best example, but an example of something I would actually do, so here goes... using prices as of yest 4pm close SPX closes roughly at 1410 buy 1000 SPY 141 sell 1 SPX Feb1425C at 23 bid sell 1 SPX Feb1400P at 23 bid (there are no Feb00 1410 strikes for SPX) profit range of (approx) SPX 1370 - 1460 (SPY 136.4 - 145.6) profit of 3.26% for 25 days if SPX between 1410 - 1460 at expiration (about 47.6% annualized) based on intermediate term 1 SD trading band, there is a 68% chance that SPX will stay between 1393 - 1466. this is a good trade IMO. --- does not include commissions, and the fact that if SPX closes above 1425, your SPY would gain approx +1.5 (if so, 25 day return would be 4.33% for 63.1% ann) and that you could have done better than the bid on the short options (at least enough to offset commissions)

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