Vikas,
Great in-depth response - it helps me a lot.
My reason for the SuperPut is that it is allowed in an IRA which I trade in exclusively (right now). I could not do the trade in #2 in that account.
If my position is ITM on 7/17, chances are good I will let it assign, but a lot depends on how much ITM and where the technicals are telling me its headed.
So if this is chess, right now it the stocks move.
Jeff
--- In OptionClub@yahoogro
>
> Thanks Jeff for sharing the video and Bob for sharing your initial
> experience with superputs...
>
> After listening to the video and reading Chris comments (some of them are
> really good points), I just thought of providing some numbers/risk graphs to
> illustrate some important points for everyone's benefit:
>
> Let me start with the prices I picked up from the video:
>
> Long Stock SID @ 22.29 (100 shares)
> Long Dec 09 22.5 Put @ 3.91 (1 contract)
> Short Jul 09 22.5 Call @ 1.44 (1 contract)
>
> This superput position is plotted in Diagram 1 and shows a buying power
> reduction of $1358.5.
>
> Now look at Diagram 2 which is nothing but a combination of Long Dec 09 22.5
> Call (synthetic equivalent of Long 100 Shares + Long 22.5 Put) and Short Jul
> 09 22.5 Call - this is the synthetic call calendar as mentioned in Chris'
> post.
>
> Watch how close Diagrams 1 and 2 are to each other - similar risk, similar
> reward, similar greek values etc - pretty close profit/loss if SID moves 10%
> up or down etc... There is no surprise here as the two positions are
> synthetically equivalent to each other...
>
> One difference, though, is that the second position requires a buying power
> reduction of only $216 which is a much smaller number as compared to the
> first position (due to the long stock).
>
> Another point to note is that maximum profit on the above two positions
> occurs when SID is exactly at 22.5 at expiration. Both positions lose money
> if SID goes significantly away from 22.5 in either direction, thus providing
> evidence of the range-bound nature of these positions.
>
> Now compare these with Diagram 3 which is a simple covered call (Long 100
> Shares + Short 22.5 Jul 09 Call) - as anyone can notice, the maximum profit
> still occurs at 22.5 but remains at that level if SID continues higher after
> 22.5, thus providing evidence of the bullish (actually neutral to bullish)
> nature of covered call positions.
>
> And Bob, the superput position is not equivalent to a collar (but to a
> calendar) simply because of the fact that the long put and short call are
> expiring in different months (Dec 09 and Jul 09 respectively)
>
> Just like superputs, other terms which are used for similar stuff are
> Married Puts (long stock + long put) and Radioactive Profit Machine (used by
> Kurt Frankenberg at Radioactive Trading).
>
> *Bottom line*
>
> We, as traders, must understand options synthetics as they can help us in
> clearly identifying "hidden" relationships between long/short stock, calls
> and puts and that can help us in taking our trading to the next level.
>
> Hope it helps some on this group.
>
> Cheers Vikas
>
> http://options101.
>
>
> On Sun, Jun 21, 2009 at 11:20 AM, Christopher Smith <chris@...
> > wrote:
>
> >
> >
> > Bob,
> >
> > Happy to help. Trading options is one area where a little knowledge can
> > get you in a lot of trouble. On the other hand, if you take the time to
> > really learn this stuff it can translate into a tremendous benefit.
> >
> > One thing that I will suggest is that you take advantage of this Options
> > Mastery home study course give-away. It really is an excellent course and
> > with Options University giving it away it is difficult to think of a reason
> > not to register for a free copy of it.
> >
> > http://www.optionsm
> >
> > Christopher Smith
> > TheOptionClub.
> >
> >
> >
> > --- In OptionClub@yahoogro
> > >
> > > Hi Chris - Thank you very much for replying to my message and correcting
> > me in what I was attempting to do. Luckily the naked puts I had expired
> > yesterday. But before I do any more I had better do some more homework and
> > quick. I guess my inexperience is showing. - Bob
> > >
> > >
> >
> >
> >
>
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch format to Traditional
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe
No comments:
Post a Comment