David,
I see no benefit in not doing 10 short calls if you are doing 10 long calls.
It will increase your return to 5.25%.
Your 93 delta protects you from any contingency.
You also have a little more money to buy a cheap put giving you great downside protection.
Hank
--- In ConservativeOptionS
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>
> 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
>
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>
>
> 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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