Your thinking is right.
Consider selling either a call or put further out AFTER the stock moves.
I'll help reduce your cb. It reduces possible profit, but reduces cost and risk.
When it moves up $3, call an atm call. Will give you a call spread, and a put.
Mirror on the downside.
Doug
On Jun 11, 2010, at 12:44 PM, Louis wrote:
Lately I've been experimenting with straddles (I hope I've got my terminology correct)where I buy a put and a call about one strike apart for the same month. As far as I can see, max loss is the cost of the two options and max gain is basically unlimited regardless of whether the stock goes up or goes down. I dipped my toe in a bit with BP and BAC, figuring their volatility would give me some practice in using this method. The past two days have been interesting watching them ride up and/or down on the u-shaped P&L graph.
Any thoughts on this?
Lou
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