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

To: OX who wrote (336)	5/28/2001 3:40:17 PM
From: tyc:>	Respond to of 355

This thread is so dead that it's probably just like sending a PM to you . On both the No Clowns and the Winter threads I have had discussions about the "option value of mines". The conclusion is that a mining stock bears a similarity to a call option. The upside potential of the "option value of mines" is destroyed by hedging. That suggests an interesting short straddle of a mining company that hedges its production such as ABX, hedging the upside risk of the short straddle with a few common stock of a non-hedger. I have today sold such a straddle (ABX), thereby putting C$1,000 into my income account. I sold the straddle at the Max Pain strike resulting in a bearish straddle. A likely pick as a hedge will be a few shares of Newmont. Even a few shares will keep pace with ABX short calls on the upside, and if necessary i can always add a few more shares of an even more volatile miner. Thought you might be interested. I hope you will read the discussions on the threads mentioned 'cause I sure wd like to hear your views.

To: OX who wrote (336)	10/6/2001 9:27:45 PM
From: tyc:>	Read Replies (2) \| Respond to of 355

Hi Ox; I continue to play with straddles. I'm learning a lot, particularly about myself ! Hah. (I hope what follows provokes a response from you.) Hedging: I have just realized that a naked straddle should be hedged against trend. There is no danger, so no hedge is necessary, while the underlying is in a trading range. The technical indicator that tells you when you are in a trend is Wilders ADX. It indicates a trend (either up-trend or down-trend) by rising. To indicate that the trend may be weakening and a trading range resuming, it rolls over. Take the following QQQ chart. stockcharts.com[w,a]ddclynmy[dc][pb45!b200!d45,2!d45,1!i][iUl14!Lb6!La12,26,9!Lf!Ll8] (change it an 8-bar ADX instead of 14 to make it more sensitive) Following this strategy one would let the straddle run to expiry. About August 15, the ADX warns of a trend, and one might then have hedged the straddle by shorting. About September 26 the ADX rolled over, and the hedge might then have been removed. Straddle alternative; The other danger of a straddle is commissions, mainly because the straddle has two sides, puts and calls, and hedging with underlying adds a third dimension. This danger can be avoided by allowing the straddle to run its course, and then to continue it by writing ONLY puts OR calls on a "ratio-write" basis, which gives you exactly the same profit profile as a straddle. e.g. at expiry the calls are exercised leaving you short the stock... Stay short and write twice as may puts; they will either be exercised leaving you long the stock to write calls against, or they will expire worthless allowing you to write more against the continuing short underlying! I know nothing about the American indexes like QQQ. Could the above strategies be followed using the QQQ as the underlying ?