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Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: skinowski who wrote (158501)	1/1/2008 5:35:01 PM
From: Win-Lose-Draw	Read Replies (2) \| Respond to of 209892

Instead of thinking of it as a short straddle + long underlying... 1) short 1 call + short 1 put 2) long 100 stock ...rearrange it a bit and it's the same as a covered call + short put: a) Long 100 stock + short 1 call b) short 1 put Since a covered call has the same risk profile as writing a naked put, (a) an equivalent position to the original would be simply writing twice as many naked puts and dispensing with the stock altogether (a strategy sometimes referred to as "The Niederhoffer" :) ). For my risk tolerance, the potential divvie doesn't offset enough of the risk of selling naked puts or the lost opportunity at "unlimited" gains - but differences make a market! If what you're after is capturing a shrink in volatility (IMO a reasonable thing to try!), how about selling OTM spreads, both bull and bear? The gain will be smaller, but there is zero chance of "undefined" risk and it has minimal margin requirement.