Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Advanced Option Strategies -- Ignore unavailable to you. Want to Upgrade?

To: tyc:> who wrote (268)	1/26/2000 7:43:00 AM
From: jjs_ynot	Read Replies (1) \| Respond to of 355

wmchen, The downside risk worries me too. Stocks tend to tank a lot faster than they rise. I agree that short stock is about the best way to hedge the short put that I have found. Shorting the stock is a little more awkward to accomplish than getting long however. Regards, Dave

To: tyc:> who wrote (268)	1/26/2000 11:12:00 AM
From: OX	Read Replies (2) \| Respond to of 355

buy stock, write straddle example not the best example, but an example of something I would actually do, so here goes... using prices as of yest 4pm close SPX closes roughly at 1410 buy 1000 SPY 141 sell 1 SPX Feb1425C at 23 bid sell 1 SPX Feb1400P at 23 bid (there are no Feb00 1410 strikes for SPX) profit range of (approx) SPX 1370 - 1460 (SPY 136.4 - 145.6) profit of 3.26% for 25 days if SPX between 1410 - 1460 at expiration (about 47.6% annualized) based on intermediate term 1 SD trading band, there is a 68% chance that SPX will stay between 1393 - 1466. this is a good trade IMO. --- does not include commissions, and the fact that if SPX closes above 1425, your SPY would gain approx +1.5 (if so, 25 day return would be 4.33% for 63.1% ann) and that you could have done better than the bid on the short options (at least enough to offset commissions)