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 : Option Spreads, Credit my Debit -- Ignore unavailable to you. Want to Upgrade?

To: jjs_ynot who wrote (1374)	4/16/2000 7:40:00 PM
From: Mark Z	Respond to of 2317

Its a tricky process. You have to start off with ITM puts and calls and continually roll down the calls. After 2 or 3 roll downs, you eventually cover all the premium you paid and at that point whatever you make on the deteriorating calls is profit. And, of course, deterioration in the underlying is offset by appreciation of the puts. I hadn't anticipated having to watch and roll down nearly every day but with YHOO that's pretty much been the case. I've been rolling down on every 10 point drop which has been daily the past few weeks. I'm doing this with YHOO and INSP this year remembering what happened last year with both. I started when YHOO was in the 190's and INSP broke 150 pre-split so I've more than covered the premium on the 220 YHOO put and 160 (80) INSP puts I still hold. In retrospect, I should have done the same thing with SCH & CSCO but I didn't foresee this crash being as widespread as its become. I only counted on the INets crashing. Given the NAZ futures are down 100, I suspect I'll miss out on both YHOO and INSP as I'm currently short calls well above where they'll open tomorrow. I won't lose per se (again, at this point the put premium is paid for and there's virtually none left), I just won't make as much as I would have had I been able to roll down near the close on Friday.

To: jjs_ynot who wrote (1374)	4/16/2000 11:17:00 PM
From: rkral	Read Replies (1) \| Respond to of 2317

dave, How likely is it that assignment will occur before expiration if I am short DITM options? Are puts more likely to be assigned than calls? I am exploring the possibility of establishing reverse ratio put spreads to provide downside insurance on common. The spread would involve shorting a DITM put to finance most of the cost of two long ITM puts. The insurance would be relatively cheap and would not limit the upside ... but it means nothing if the risk of assignment is too high. Regards, Ron