Joe, I trade the puts and the calls. The stock cannot be traded as long as the call covers it in an IRA. The call is the usual suspect, but not the only one.
Let me give you several scenarios where I mighttrade the put. Let's say volatility increases. That is wishful thinking in this fat premium market, but it could happen. Then, if LU declined to $50, I might make enough money selling my put and rolling down to cover the extra risk. And if the stock went up, and my put premium stayed flat, I might buy a deep in the money put to wash out the premium in the contract and sell my out of the money.
One of the best scenarios I love to play is if the stock goes up and I unwind the buy/write early, leaving me with a free put on a very volatility stock. For example, if LU ran to $80, and the put premium was 11 points over, I could unwind, pocket $8 profit in premium, and effectively have a free $50 put and a dollar in my pocket. This happens all the time, in both bull and bear credit spreads. Or, I could sell the put, too, and just annualize the profit and then look for the next victim.
If volatility declined, I might roll the call up and pull the put up behind it. This isn't my usual style, as it reeks of momentum, but the numbers can make me consider it in certain circumstances.
You used an acronym that doesn't ring a bell. Maybe the term does. What do you mean by DAQ?
MB |
