[TheOptionClub.com] Re: SPY premium

 

I'm not sure I fully understand what you're trying to accomplish. You
have a put ratio spread which is a combination of a bear put spread and
a short naked put. Using the DEC 2012 options, that position is going
to make money from very slow, gradual theta decay over the next two
years. Your annualized return is probably in the 2% - 3% range.

So, you want to sell front month premium against it...

There really is no way to sell premium against the spread because you
have one long option and two short options, which means that you're
already naked one short option. You don't have any more long contracts
against which to sell.

What that means is any additional short premium strategies will be
separately margined. I suppose you could sell front month credit
spreads, but I would consider them separate trades and manage them
accordingly.

If you provide a bit of guidance as to what it is you're trying to
achieve with this position, we might be able to provide a bit more
meaningful insight.

Christopher Smith
TheOptionClub.com

--- In OptionClub@yahoogroups.com, "asdfffg1" <joshuas7@...> wrote:
>
> On Jan 1, 2010
> Your long a DEC 2012 put at 110 for $1700
> and short two DEC 2012 puts at 90 for $950 each
>
> If you had no choice, and 'HAD' to be in the position above until
expiration or prices going below 900 on the underlying, what comes to
mind as to how YOU would sell short term premium each month, or each 3
months, if it was allowed in our intial setup rules.
>
> I know there's a million answers, and that no trader trades the same,
and there's no holy grail, and on and on. Yes, that's true, but I want
to observe the different traders outlook on the market in this scenario
in terms of adjustments. I welcome and appreciate all views.
>

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