FWIW,
I bought 500 sh of TZA @ 7.29 this morning, sold the June $12 call @ .41 and bought the May $7 put @ .55. Net cost with commissions was $7.46, closed today @ $7.60.(up 1.9%).If the market keeps dropping, at some point I'll sell the put and put on a tight trailing stop to protect profits. Max loss is roughly 6.5% if the underlying heads south. With this volatile market, I should know by the put expiration whether to hold or not.
I did essentially the same today with FAZ and it's up 6.6% from my cost. Depending on how things look Monday, I may add BZQ and SRS.
This is definitely not a conservative options strategy and I am aware of how quick things may change, but it seems a tossup right now as to whether this is just a brief correction or whether there will be a longer term bear. It meets my needs at the moment and gives me a bit of leisure, thanks to the put, to watch things develop one way or the other.
Lou
--- In ConservativeOptionS
>
> Hi,
> TZA moved from an open of 6.45 to a high of 8.09 and back to a close of 7.00 yesterday!
> Stan
> --- In ConservativeOptionS
> >
> > Why out of the money? Are you wanting to hold this ETF and keep selling out of the money calls on it?
> >
> >
> >
> >
> >
> > ____________
> > From: rayhartl <rhartl@>
> > To: ConservativeOptionS
> > Sent: Thu, May 6, 2010 4:06:16 PM
> > Subject: [ConservativeOption
> >
> >
> > TZA was over 100.00 back in March of 2009. If we have a big sell off and the market goes back to those lows, what is the chance that TZA would go back over 100.00/share? The same may be true of the other sector 3x inverse leveraged etf's. Would not the purchase of otm call options on these etf's be a cheap insurance policy if the market really does break as many are predicting?
> >
> > --- In ConservativeOptionS trategies@ yahoogroups. com, "Louis" <loupi3@> wrote:
> > >
> > > drjoe,
> > > I was aware of the high percent cost, but in the interest of keeping my email concise decided not to delve into that aspect (wrong decision I guess). Anyway, I appreciate your answer as your advice and experience have been helpful.
> > > My overall thrust was that given the rapid swings of ETF's like TZA, the value I pay for protection would, if the bear market analysis is correct, be quickly overcome by an upward move, at which point I would use a protective stop (and possibly sell any remaining value in the put).
> > > At this moment, as I write, TZA has gone up a bit over 7%. If the bear continues, I would, as soon as my gain reaches in the area of 5% plus the cost of the put, switch to a tight trailing stop to protect the profit and sell any remaining value in the put.
> > > I haven't done anything yet since my past history is full of examples of entering at the wrong time (so if I should buy TZA, I'll let the board know so that they can load up with TNA :-)). But I'll probably place a limit order for tomorrow.
> > > I usually offset the costs of my protective puts, BTW, by selling a CC or CSP, but in this case, in order to keep things simple, I'm just exploring the basics (long on a volatile ETF, protecting it with a long put).
> > > Any thoughts?
> > > Lou
> > >
> > > --- In ConservativeOptionS trategies@ yahoogroups. com, "joe & leigh" <gass20@> wrote:
> > > >
> > > > the may 6 put @ 0.30 is 4.4% (100% annualized) time value paid for 16 days of protection ..the june put @ 0.59 is 8.9% (74% annualized) time value paid for 44 days of protection doesn't sound cheap to me. but cheap is in the eye of the beholder.... drjoe
> > > >
> > > > --- In ConservativeOptionS trategies@ yahoogroups. com, "Louis" <loupi3@> wrote:
> > > > >
> > > > > If the market is turning bearish, as one of my subscriptions tells me, then I'm considering buying TZA, which closed @ 6.30.
> > > > > The May $6 put is only .033 and even the June is 0.59 so protection is pretty cheap for this 3X contra, which makes for a very nice opportunity.
> > > > > What am I missing?
> > > > > Lou
> > > > >
> > > >
> > >
> >
>
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