Dell Technologies Inc. Message Board

STOCKTALK

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.

Technology Stocks : Dell Technologies Inc.

DELL 154.64

-3.4%

Nov 4 3:59 PM EST

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: kaka who wrote (164770)	4/17/2001 1:45:55 PM
From: stubba	Read Replies (1) of 176387

kakamongous the whole idea behind the use of bull-put and/or bear-call spread is risk management obviously one would like the IBM stock price to stay between $90 and $110 in this scenario but to accomplish thru use of naked options uses a great deal of buying power with virtually unlimited risk in either direction buying the put and buying the call on the other side of sold options dramatically limits the overall risk and use of buying power which therefore increases the percentage returns in my previous post I think I outlined where the net credit for both the bull-put and bear-call would be $1 which would make the total risk the diff in strikes less the net credit or (5-1=4). this would make the percentage return equal to 1/4 or 25% if successful. In the naked option situation you would receive the same $1 net credit but the buying power required by your broker is likely anywhere from 25-50% of underlying equity. If we assume it is only 25% that would mean the total return if successful would be about 1/25 or 4%

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next