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Strategies & Market Trends : Advanced Option Strategies
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To: tyc:> who wrote (274)1/26/2000 4:03:00 PM
From: OX  Read Replies (1) of 355
 
>>>Should a person react to this change in
probabilities ?<<<

for me, in general no. baring major movements in the underlying, you can usually tell if a band is going to expand or shrink. this is one reason why I only play 30 days out. (I will usually stake out half my trades w/ 4wks to go, and the other half w/ 2wks to go)

>>>If it is now more probable that the put will be exercised than that the call will be exercised, should
one adjust the long stock to a short or neutral position ?<<<

I wouldn't normally do a 'buy stock, write straddle' nowadays because there are too many 'legs' to it... but if I did, it would be w/ the intent to buy half a position w/ the trade and let the other half of it be put to me at the downside breakeven... so if my views of the underlying have not changed, and it's temporary mkt weakness, I would not mess w/ the any parts of the trade. If, on the other hand, something serious and unexpected has changed w/ the underlying, I might consider getting rid of the long at some perdetermined price drop and then short the underlying at another predetermined price drop. I would give myself cushion on both these 'repair' moves so as not to 'waste' the cost of repairs. and have to put them on and take them off too often.

let me know if I didn't answer your Q.
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