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Strategies & Market Trends : Advanced Option Strategies -- Ignore unavailable to you. Want to Upgrade?

To: ScamSeeker who wrote (159)	8/27/1998 8:21:00 AM
From: Joe Waynick	Respond to of 355

Nice to meet you Richard! Wouldn't your return be (18k - 4.5k) / 24k = 50% assuming that both of your option expire worthless. My return is (18 + 1 - 4.375)/12.5 = 117%, (sorry for the typo in the previous post), since I'm using margin. Also, I'm betting that at least one side of my straddle will have value because the only way for the entire position to expire worthless would be for the stk to be exactly $25 on December 18th. I plan to close the straddle in December at either $24 (for $1), or $26 (for $2). I only counted $1 in my estimated return to be conservative. Also, wouldn't your return would be even less if the stock doesn't cycle once per month. You are correct. That's why I purchased the option insurance. To protect me if the stk breaks out in either direction. Remember I selected this stk based on its historical pattern of trading between these two ranges each month. However, there's always the risk the stk will breakout, or even slow down in reaching its support and resistance cycle. Don't forget that the objective is not to always win big, but to never lose. After two trades I have NO RISK, regardless of what happens to the stk! Even if I'm only half right, I'll make over 58% profit. Do you blindly buy and short the stock at your limits 24 and 26.25 or do you try to time the transactions in order to maximize profits. I wouldn't call a year of consistent price movements "blind." $24 - $26 is the most profitable range for this stk. Also, this is a mechanical system. I'm short when my long price target is met, and I'm long when my short price target is met. Thanks for your questions Richard! Don't be a stranger to the thread.