Re: [TheOptionClub.com] Re: Update on Reverse IC Positions

 

On Sat, 06 Mar 2010 20:45:09 -0000, "npnotesin" <npnotesin@yahoo.com>
wrote:

>Ricky, My suggestion would be to put reverse IC positions only on
>stocks that have beta > 1.25. IBM with a beta of 0.8 would move less
>than S&P 500 and has a higher probability of expiring within the short
>strikes causing losses. However, I wouldn't recommend buying condors on
>IBM either. To reduce expenses, you may trade on penny options. List of
>penny options could be found at CBOE
><https://www.cboe.org/hybrid/pennypilot.aspx> In addition, trading in
>higher priced shares/ETF will save comissions. For example, RUT is 10X
>IWM. Though bid/ask spreads are tighter on IWM(penny option), 10X those
>spreads is usually what you will find for RUT and you will save
>comissions 10X.
>Thanks.

You're welcome and thank you. It is unfortunate that Optionshouse no
longer has their old pricing scheme of $10 per trade, 4 legs unlimited
contracts. That was ideal for this methodology. Now they charge
12.50 per 4 legged trade with .15 each contract. Are there any flat
fee, unlimited number of contracts brokers left?

Besides a volatility measure like beta, I think another thing to
consider when choosing stocks to use for reverse ICs is whether of not
they have dollar apart strikes. MSFT does and even though its beta is
slightly under 1, it seems to move at least a strike between
expirations, enough to squeeze out a profit with reverse ICs. Of
course, all the ETFs for major indices have dollar strikes. Are there
any other examples of RUT/IWM pairs?

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