Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : INTEL TRADER -- Ignore unavailable to you. Want to Upgrade?

To: Chris who wrote (5180)	1/23/1999 5:02:00 PM
From: Gersh Avery	Read Replies (1) \| Respond to of 11051

Hi Chris .. Yes .. I didn't like it either .. When selling naked puts you better be doing it with a stock you wouldn't mind owning. Now that you mention selling naked options I suppose that it may be time to pass out the inverse of the ratchet run: The ratchet sell: Stock XYZ is currently selling for $75. Sell 20 put and 20 call contracts at the strike. XYZ goes up to $80 .. sell 20 put and 10 call contracts at the $80 price. XYZ goes up to $85 .. sell 20 put and 5 call contracts at strike. Stock drops back to $80 .. sell 10 put and 20 call contracts. Falls back to $75 .. sell 5 put and 20 calls. Price falls to $70 .. sell 2 puts and 20 calls. In other words .. when the trend changes cut the amount of options that went against you in half while keeping the amount that went in your favor the same. When the trend changes back reset to as if you were at the start again. In the above example .. say that the options all expire when the stock is at $70: you have sold: 77 put contracts and 95 call contracts all at the strike .. Of these all of the call contracts have expired worthless. Of the put contracts 2 have expired worthless, 25 are $5 in the money, 30 are $10 in the money and 10 are $15 in the money. 25 * $500 = 12.5k 30 * $1000 = 30k 10 * $1500 = 15k total you would pay out = $57.5k If you are able to collect an average of 5 for each at the money option then you would have collected $83.5k selling these options. Profit then = $26k Much larger profits hit when the stock ends up in the center of the range .. Not backtested .. Comments any one? Gersh