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Strategies & Market Trends : Short Selling, Dark Side, Bubble Busting Laboratory
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To: Perspective who wrote (320)8/23/2006 2:54:07 PM
From: ild  Read Replies (1) of 361
 
I usually buy in the money poots so I pay very little for time premium. Sometimes less than 5c for time premium if you account for dividends. It's more like leveraged short. High liquidity allows buy or sell with little slippage, so it's easy to roll over expiring position. If poots get deeper ITM it's hard to sell them for the intrinsic value so in many cases I buy the underlying and do "instant exercise" (available at Interactive Brokers). XLF (and all other SPDRs) will go ex-div on expiration Friday in September, so "instant exercise" doesn't make sense before that day.

So I short individual stocks where poots are too expensive and buy poots on ETFs where poots are cheap.
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