Wednesday, September 30, 2009

[TheOptionClub.com] Re: Box option spreads

 

I hope this is the best way to respond.

 

Boxing of a vertical is akin to liquidating the trade, whether going on vacation, taking a profit, taking a loss or no longer having the original market bias.

 

The bigger question about whether to box or liquidate has to do with what is going on in the particular call vertical versus the offsetting put vertical; 

Which one has the tighter market to make the easier trade?

Which is the better price (arrive at the synthetic of each other by subtracting from strike difference*)?

Is there a cheap legging opportunity consistent with the new market bias?  See what I mean in the following 4 ½ page excerpt from “Options Trading: The Hidden Reality”:

http://66.151.24.54/riskdoctor/Downloads2/LeggingBoxExcerptOTTHR.pdf

 

 

*Carry costs less of a factor during this low interest rate environment.

 

All the best,

 

Charles

 

Charles M. Cottle

www.riskdoctor.com

Raising Options Consciousness

 

Follow me on Twitter: @RiskDoctor

Facebook me: http://tinyurl.com/m68kym 

 

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