Option Trading Articles: Re: [ConservativeOptionStrategies] Question from an amateur

Wednesday, December 9, 2009

Re: [ConservativeOptionStrategies] Question from an amateur

According to my figures, you should be profitable by $300 rather than a $300 loss. (GDX is currently trading at $48.81...12:35 PST).

If you sold the Mar40 Calls and the Mar38 puts, you have have roughly $28.000 risk to the downside and unlimited risk to the upside. Assuming you have six figures in your account AND MORE THAN 5 months in the saddle, perhaps you could ask for and get portfolio margin, which MIGHT allow you to do what you are proposing. (That's not to say that you should do it).

F.W.I.W. - John Bevilacqua

--- On Tue, 12/8/09, amitshenoy_dba <amitshenoy@gmail.com> wrote:

From: amitshenoy_dba <amitshenoy@gmail.com>
Subject: [ConservativeOptionStrategies] Question from an amateur
To: ConservativeOptionStrategies@yahoogroups.com
Date: Tuesday, December 8, 2009, 8:42 PM

Hi ,

I have a question and trying to learn all the strategies. Please bear with me as I started only 5 months back.

Here is the hypothetical scenario.

Sold 10 GDX march 40 puts for 1.8
Bought 10 GDX march 39 puts for 1.2.

GDX is currently falling . I dont want to close out for a loss (currently 300 dollars) .

Lets say GDX gets down to 40+. I am wondering if I can do the following.

Sell 40 GDX call . This will even out my GDX march 40 put.
Sell 38 GDX put to make up some of the loss of my march 39 put.

Does someone see a downside to this. I am planning on doing this in march as it comes closer to expiration.

What would some of the experts do to get a better deal out of this loss maker.

thanks
Amit