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Strategies & Market Trends : DAYTRADING/SWINGTRADING STOCKS with INTRADAY INVESTMENTS -- Ignore unavailable to you. Want to Upgrade?

To: - who wrote (11)	5/16/2001 12:16:36 AM
From: Dan Duchardt	Respond to of 565

Steve, Thanks for the reply. I do spreads too, and you are certainly correct that it is a more "set it and forget it" approach than what I am playing with now. A nice thing about this spread is you really aren't hurt by the time decay... it's working FOR you (since the short call is decaying along with the long call) If set up properly, time does work for you, but in a more limited way than if you only sell premium. The spread does sell some time premium, but it also buys premium so the time benefit is diminished. The protection against the big move against you is certainly a great advantage of spreads. As it stands now, I'm not worried about JNPR gapping up 100 points. If it does I'll take my little profit from the covered call and move on. The danger is a big move down, but less danger than being long the stock. A nice trend move down would be a great trade opportunity for selling the stock to uncover the call until it falls below the strike, then catching the bottom to short the put. On a stock like JNPR, collecting a total premium for a short straddle one month out of 30% or more of the underlying value is realistic, if you get the move in the right direction to begin with. You might also take less premium, but have a short strangle with a "don't care" zone between two strikes where both options can expire worthless. The trick is staying on the right side of a stock position to offset any amount one option goes in the money. You do need to stay on your toes, but I see it as a less intense position than daytrading.. at least during the trading day. Of course, as you suggest, being on the wrong side of a big overnight move can cost you, but at least that would be tempered by one of the premiums. In that respect it is safer than pure overnight swingtrading of stocks. Margin works out pretty well with this approach too. Yes, it takes more than a spread, but it is copmparable to outright stock ownership. At my broker, a short combination margin requirement is just the greater of the two separate shorts, which is less than being long or short the stock.. Taking a long or short in the underlying then creates a covered option and a naked option, so the worst case is not too much more than owning or shorting the stock. It's a pretty aggressive approach and should not be done with more shares than you would buy or short outright, but it sure is nice having the other guys time premium decaying into your pocket. There is also the possibility of eventually working into very attractive credit spreads that can be put on the shelf and forgotten until payday rolls around. Dan