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

To: mozoneman who wrote (1899)	1/9/2001 8:14:40 AM
From: holland	Respond to of 2317

Subject Wash Sale Rule. I have read numerous post and followed links to the IRS site. It seems that the more that i read the less I understand. In regards to the wash sale rule and spreads. If I exit a spread at a loss and enter the same stock with a different strike price how is the WSR applied? I am having trouble understanding how the WSR applies to the various option trading strategies. I as a novice would appreciate input from those that have been trading spreads and straddles . Thanks

To: mozoneman who wrote (1899)	1/9/2001 8:57:47 PM
From: KFE	Read Replies (1) \| Respond to of 2317

Huan, Buy Feb 80, Sell Jan 80 PUTS for 1 5/16 Buy Feb 105, Sell Jan 105 CALLS for 2 If IBM fluctuates between 90 and 100 next 2 weeks, those 2 spreads should make money because the shorts expire worthless and I can sell the longs... Sorry I couldn't answer your question earlier today but I was not on SI today. I will base my analysis on today's closing bid/asked prices. The put spread could be done for 1 1/2 and the call spread for 1 15/16. The liquidity on IBM options is good so you could probably do both spreads for the total credit of 3 5/16 which you posted. The put spread has a nice skew and will be profitable if IBM remains unchanged, goes down any reasonable amount, or goes up five dollars or less. The call spread is not particularly attractive and will be a breakeven if IBM remains unchanged and profitable if it goes up any reasonable amount. One of the biggest risks in a long calendar spread is a downward spike in IV. IBM's IV is right at the historical high and is due to report earnings next week. I don't know enough about IBM options to figure out if the expected earnings report is a significant part of the high IV. If it is not then I wouldn't be concerned about a large IV move in the remaining seven trading days to Jan. expiration. The skews on the 80 to 95 Jan-Feb puts offer excellent opportunities for long calendar spreads. The Jan IV on the OTM puts is much higher than the equivalent OTM calls. If you think that IBM will trade between 90-100 or close to that then the best strategy that I can quickly see is to do a long calendar spread on the 90 puts. The trade could be done for 2 1/4 debit or less and if IBM remains around where it is right now you would be looking at more than a double in less than two weeks with a small amount of risk. I have done the strategy that you suggested (OTM calendar spreads on both puts and calls at the same time) but I think that if you believe IBM will be in a trading range the next seven trading days the put spread offers a much better risk reward. Regards, Ken