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Strategies & Market Trends : The Options Box
QQQ 629.07+0.5%Oct 31 5:00 PM EST
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To: Poet who started this subject5/9/2001 1:42:43 AM
From: farmersue  Read Replies (1) of 10876
 
Poet, I was hoping you might field a question for me (others on the thread, please feel free to comment as well). I'm re-entering the market after being out for a while and am just getting started in options.

I've been reading a book on options trading by George Angell called "Sure Thing Options Trading" but have a specific question I was reminded of while reading the article on the CSCO "synthetic stock" strategy. The idea occured to me when I first learned about shorting "against the box" and found I liked the leveraging possibilities of this once I got over the initial hang-up of shorting something I owned as a long.

Here's the gist of it: if I felt like a long position I was holding was about to get hammered (most of last year) I would short it against the box so I didn't have to come up with all the extra money for the position. The problem was that I was getting overextended on margin.

Now that I'm learning about options, I'm wondering, what if one bought both puts and calls for the same security with enough time left on the contracts to sell both at a profit due to large swings in the market? Is there any reason this might be a bad idea besides the obvious risk - maybe something I haven't picked up on yet?

For example, I shorted JNPR and XOXO a couple of weeks ago down to $30 and $2.8, covered them both only took a long position in XOXO. In hindsight, had I taken the long position in JNPR, I would have doubled my holding by now. So, I was thinking options may be a way to take advantage of these kinds of swings without the headaches of margin calls when things go wrong for a while, by buying a long enough contract.

Sorry for the long post but I appreciate any insight you guys have. Thanks!
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