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

To: ccportfolio who wrote (172)	6/25/1998 4:03:00 AM
From: WTMHouston	Read Replies (1) \| Respond to of 2317

To anyone: I will admit up front to being a novice at advanced option strategies. That said, what, if anything, is analytically wrong with the following scenario. AMZN Stock price at 100 write July 100 put @ 11.25 write July 100 call @ 9.625 = total premium income + 20.875 If price stays at 100 = +20.875 If price goes to 90: on put will have to buy at 100 when worth 90 = -10 call will expire worthless net = +10.875 thus, protected on downside to ~80 If price goes to 110: will have to sell at 100 with price at 110 = -10 put will expire worthless thus, protected on upside to ~120 So long as it doesn't go below 80 or above 120 between now and July 17th, the position will make money. I understand that the true risk here comes from the volatility that causes the large premium to begin with and that the risk comes in a large move outside of the parameters. The risk can be managed and limited, however, by closing the positions to limit the loss if it exceeds the 80-120 profit range: the degree of exposure by doing this depends entirely on when in the next 22 days it exceeds the range: the later, the lower the exposure because of the time delay in the premium. Closing it would lock in the loss, but would also limit it. Assuming that it went to $120 on the day after the positions were taken: The call would cost around $24 to buy back (time premium reduction and spread - the July 80's only have a $3 time premium). The put would cost around $6 to buy back. Total closing cost of $30: maximum possible loss of $10. Probable loss, if there is one, is even less. TIA Troy

To: ccportfolio who wrote (172)	6/25/1998 9:31:00 AM
From: Jim Snyder	Respond to of 2317

I do not have the spreadsheets, but he did try and sell them to me with each e-mail I sent him. I calculate the 2 sigmas using the quotes-plus (version 2) program. This program allows you to write scripts to do just about anything with the data. I wrote a script to scan the OEX (or anything else for that matter) and calculate the maximum up and down moves for the past 13 expiration months. It takes those maximum up and downs and calculates the 2 sigmas for each side (up and down). The 2 sigmas I got were about 22 for the upside and 19 for the down side. The OEX was trading at about 535 on Monday so the positions you would probably take were: Call Side Sell Jul 98 560, Bid was 2 Buy Jul 98 565, Ask was 1 5/16 Net Credit 11/16 minus commissions Put Side Sell Jul 98 515, Bid was 4 1/8 Buy Jul 98 510, Ask was 3 3/4 Net Credit 3/8 minus commissions Hopefully we could squeeze out more premium on the Put side by asking for more. If the OEX stays between 515 and 560, you're cool! Looks good on paper...let's see if it works. About your broker question, I don't know anything about Investrade. I use Accutrade. They have a neat internet tool for various option strategies. It's the same one that Ameritrade uses. Accutrade is a little steep on commissions (minimum $35). I heard through some other threads that Pacific Brokerage was good but I haven't checked them out. Good Luck! Jim