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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: mishedlo who wrote (17854)1/2/2002 9:20:51 PM
From: I. N. Vester  Read Replies (1) of 99280
 
time spreads: it's a reasonable play, but you still
have to be right on the direction and timing to make
it work well. if the near term option is in the money
at expiration, it works better if you have the $$$
to buy and deliver the underlying at expiration rather than
paying any time value to buy in the short side, which you
will have to do even on day of expiration if you buy the
short option back, tho not if it ends up out of the money
of course. of course you have to put in some more
net $$$ for the intrinsic value, but hopefully you end
up with a very low price for the remaining long side time.

if the underlying is just below the strike a few days
before expiration, for the added risk of getting caught
in a downdraft you can buy the underlying at that
price. then if the price moves above the near strike you
deliver at a profit and also get some free intrinsic
value on the remaining long option, otherwise sell the
underlying around even, or liquidate the whole position
or whatever.

i've been doing this on equities with wider spreads and I
get much better pricing when i tell my broker to buy
the spread at x cost net. their options guy often gets
me filled well e.g. both sides at the ask, vs
selling at the bid and buying at the ask, as you have to
if you buy/sell each side separately esp on issues where
there is such low opt volume so you can't get filled inside.
i trade at ubs painewebber but i imagine any broker can
take a phone order to establish a spread on net cost basis.
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