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 (1695)	9/24/2000 10:12:51 PM
From: Vol	Read Replies (2) \| Respond to of 2317

I was actually quoting a post off the yahoo msg boards. In the example given, the following occured at Sept exp: SPX 1465 buy Dec01 1600 put for 140 sell Oct 1475 put for 30 1/2 per the strategy: If SPX falls do nothing till next exp If SPX rises to 1490-1500, buy back Oct 1475 put, then sell Oct 1500 put. I think the idea is to roll up the near month short put when then next 25 pt increment strike is hit. In a big move, the LEAP put could be rolled up, too, I guess. If SPX is less than the strike of the short put at exp, the plan is to roll out to next month, same strike. As far as I can tell the advantages are: 1) Discount on far out ITM put in a European style option. In the example above, the Dec01 1600 put barely had a premium. 2) Sell ATM to slightly ITM put out one month to take advantage of rapid time decay and bias a little towards bullishness (long term the market goes up) Yes, the problem could be rapid upward move in the index. Some things that buffer this: 1) It's a fairly non-volatile index (c/w QQQ, SOX) 2) The delta in the long term put increases as the index goes up (i.e. less levarage) The delta on the Dec01 1600 put is around -46 I believe. Comments and criticisms welcome. Vol