Nice to be thought of as a sophisticated trader, which is a myth that could be perpetuated by 1) not revealing my brokerage statements until 25 years after my demise and 2) repeating as my own (known in Boston as the Mike Barnicle method) the trading strategies outlined in McMillan's "Options as a Strategic Investment"
(a book that is a must for anyone trading options).
Synthetic, not syndicated, thanks Steven. Chapter 21: Synthetic Stock Positions Created by Puts and Calls.
NW, I'd like that strategy better if it was done at different strike prices, like writing the 35 calls and buying the 25 puts. You'd get some upside appreciation potential, and with six months of time (assuming still the Aprils) you might be able to make some money on the puts, as well. Just my bias towards the stock's potential rise when they announce what they're plans are for the $2 billion.
SteveG, you're right about the leverage on the trade. At Fidelity, to write naked options they take 30% of the stock price + the price of the option + $10,000 (only for the first 10 contracts) and subtract this figure from your available to borrow figure (not your equity buying power). Thus, for a trade of 500 contracts the collateral needed to execute this trade would be substantial (approximately $735,000 of borrowing power implying at least $1.5 mill of equity).
If the trade moved against you, you'd better have a huge portfolio or be an institution, which undoubtedly is the case here.
By the way, any thoughts on where we are going next?
Regards, Brian |
