Options 201: Beyond Obi-Wan-Kenobe Message Board

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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe

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To: Allen Furlan who wrote (777)	2/25/2003 10:27:12 PM
From: Dan Duchardt	Read Replies (3) of 1064

Good of you to drop in and share some of your trades with us. Today stock collapsed and I was still able to buy back the puts for 1$, leaving me with very satisfactory naked position in calls. I assume the IV was inflated in front of anticipated news, and collapsed along with the price. Buying back those puts for the price you paid worked out very well for you. The remaining short calls look pretty safe now, but why not buy them back for $0.10 and free up the margin to use for another play? Seems like a long time to wait to make that last dime. Most of what I have been doing is outright buying long and selling before expiration (hopefully at a profit), and some diagonal or calendar spreads with long LEAPS calls and selling nearer term. I often wind up with ratios, but rarely do the detailed calculations to achieve neutral delta. I try to anticipate the general market movement and bias the position accordingly. This morning I unloaded a few long puts and completed a QQQ put butterfly I had been working toward for some time. I had held long March QQQ puts at 24 25 and 26 in the ratio of 1 2 1, and sold double the 25s to go 1 -2 1. By legging in as I did I collected a net credit for this position that now cannot lose. Profit will be maximized if at 25 at expiration. I might very well unfold it if we get a substantial rally here. I also have a diagonal QQQ spread with 2005JAN25 calls long and a fewer number of JUN26 calls short. The ratio is 9 long to 5 short now, but will be adjusted as the market moves. I had a bunch of long 2004JAN28 calls I decided not to carry any longer. I will be looking for some 2006JAN LEAPS as they are rolled out, and might short some 2004JAN if I can catch a good price swing. I usually don't write that far out, preferring 2 or 3 months out for shorts. I'd be interested in a bit more detail on your FOTM RMBS calls. I just lost some underlying RMBS having written FEB12.5 calls after the first good pop. I generally manage to write covered calls too soon when they are good, and too late or never when a stock is slipping. Some day I will be free to use my money as I wish and hope to never own underlying again.

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