hank let's see, monday morning
iwm
at 63.03
first, let's look at the atm put strike 63 march with 26 dte ===time value = 1.4
that is 1.4/26 days or cost of insurance of 0.0538 per day that is 1.4/63 or 2.22 percent for 26 days or annually is 2.22*365/26 or 36.83 percent cost....hate to pay car/home insurance at that cost
second, lets look at the ditm put strike 70 (jan12) with 698 dte (days to expiration) ==== time value = 6.48 that is 6.48/698 days or cost of insurance of 0.0093 per day that is 6.48/70 or 9.26% for 698 days or annually is 9.26*365/698 or 4.84 percent cost.....real number actual example.....
--- In ConservativeOptionS
>
> Hi,
> I appreciate your examples but have a hard time understanding because you tend to leave out pertinent data like BTO, STO, calls, puts. etc.
>
> That being said, I really don't understand why the ITM Leap super put protection with such a high cost of time value.
>
> Why not just buy the current month atm puts which are very cheap but if you have that sudden crash those puts protect you just as well.
> Multiplying the 10 or 12 cheap puts, is still a lot less cost than your super leap put.
> Also, by doing a cheap put each month you also can adjust the put to buy each month expecting this is nothing but cheap insurance.
>
> Thanks.
>
> Hank
>
>
> --- In ConservativeOptionS
> >
> > david
> > what is the 10-20-30 rule?
> >
> > the position is good. i would consider doing 8:10 or 9:10 ratio instead of the 7:10....your long leap is over 9 delta.
> >
> > i have been considering a long leap put ditm like a 70 jan12 put. during the correction of 40% even though i was able to generate monthly income it wasn't what i considered satisfactory. i applaud you by paper trading first. i always tell people anytime you consider a new option strategy do at a minimum 6 months preferably 12 months paper trading first...drjoe
> >
> > --- In ConservativeOptionS
> > >
> > >
> > > Good Morning Dr. Joe,
> > >
> > > I was chatting with a fellow trader regarding your post of DIA-DLS. I am trying to execute a paper trade to get more familiar with the strategy you formulated. I would like to use one of the other surrogate that you mentioned - IWM.
> > >
> > > If I have followed your strategy correctly, I have the following:
> > >
> > > Today's date: Feb 17, 2010
> > > IWM Last trade: $62.05 (Feb 16, 2010)
> > >
> > > IWM-DLS.
> > >
> > > Using the 7/10 SC/LC ratio. We now have the following.
> > >
> > > Buy 10 Jan12 40 IWM C @ $21.93 Delta .9311 - Total $21,930.00
> > > Sell 7 Mar10 63 IWM C @ $1.15 - Total $805.00
> > >
> > > 805/21,930 = 3.6%
> > >
> > > Would this be a viable paper trade?
> > >
> > > Would it be prudent to use say a 10-20-30 rule?
> > >
> > > Thank you for your consideration in answering the above.
> > >
> > > Regards,
> > > David Lim
> > >
> > >
> > >
> > >
> > >
> > >
> > > Jack, I must have read Dr. Joe's Yahoo Post #832 a dozen times to learn, still need some help I am afraid.
> > >
> >
>
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