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

To: David Lind who wrote (3035)	2/16/2000 11:41:00 AM
From: RoseCampion	Read Replies (1) \| Respond to of 8096

short strangle examples...nterested in responses from you or any others who have experimented with such a strategy. If there are none, then I'll be happy to keep the thread posted on results. Please do. I've not tried this, but am very intrigued - as you point out, it runs counter to the normal idea of a 'safe' short strangle to be doing this with a high-volatility stock, which makes it even more interesting. It occurs to me that as in any straddle-style position (where you have options opposing each other and moving in opposite directions in price) you've provided yourself with the option, should the underlying move violently in one direction or the other, of closing out (buying back) the now "worthless" leg for a small amount and staying short on the remaining leg. This adds some risk, of course, and it may not fly if you're playing close to the hairy margin edge - but it offers the potential to profit from a highly volatile stock in both directions without having to guess which direction swing is coming first. Sort of like being able to bet on red and black at the same time and then later decide which one bet you want to be "real". Keep us informed, definitely. -Rose@backtolurkmode.com-

To: David Lind who wrote (3035)	2/16/2000 12:43:00 PM
From: DM	Respond to of 8096

Dave Short strangles. I have looked into this idea a few times, but have never done one (yet). Please keep us posted on how they do. Thanks DM

To: David Lind who wrote (3035)	2/24/2000 11:27:00 AM
From: David Lind	Read Replies (3) \| Respond to of 8096

SHORT STRANGLES - A few weeks ago I posted info on short strangles, a strategy I am enjoying some success with. A few people asked me to keep them updated. For those of you new to this approach, it involves the sale of a call and put, both way OTM of current price. Best stocks IMO are relatively volatile, with price near the center of recent trading range when the position is opened. Volatility permits writing far OTM for decent premies and safety. Recent and current positions: ERTS(open@86) - Sell Feb 105 Call/Sell Feb 65 Put Total 3.5 points credit (position expired with full premies) ERTS(open@84 - Sell Mar 110 Call/Sell Mar 60 Put Total 4.43 points credit EBAY(open@152)- Sell Mar 190 Call/Sell Mar 110 Put Total 4.78 points credit (huge spread here) LCOS(open@75) - Sell Mar 100 Call/Sell Mar 55 Put Total 1.4 points credit CCU(open @83) - Sell Mar 95 Call/Sell Mar 70 Put Total 2.25 points credit If you care to check the charts, you will note that all strikes are far OTM of recent trading ranges. This is due to the high premies that help spreading the strikes away from price. An interesting variation on this strategy puts a safety net under the strangle, by buying a cheap call and put outside the short positions, thereby protecting somewhat against any violent moves. This is often called an Iron Butterfly, and I may enter a few trades next month. It would permit the short options to be written a little closer to current price for larger premies, which would finance the protection. My personal opinion is that this market may run relatively flat over the next couple of months, compared to the past few, and this strategy may continue to pay dividends on carefully chosen stocks that are written when they are in the middle of the trading range. One can also add a little up or down bias when selecting the strikes. -David