rick, i keep cash available in case my short put is assigned so i have the cash to purchase the stock for then trading covered calls. the reason for the protection is:
iwm was 84 at one time and if i sold puts at that strike and iwm dropped 40% like it did i would not be able to get any meaningful premiums to generate monthly income and this is another reason i keep cash around, ie to purchase more protective leaps and selling short puts at the now lower strike price. drjoe
--- In ConservativeOptionS
>
> DrJoe,
>
> If you allow the short puts to be assigned and then sell short calls until the shares are called away and then return to sell short puts what is the purpose of the long DITM put since you are keeping cash ready to pay for the assigned shares?
>
> Rick
>
>
>
>
> --- In ConservativeOptionS
> >
> >
> > sean
> > my diagonal put spread is a strategy separate from the call strategy, but similar. you could use all your cash to purchase insurance and equivalent number of short puts since with a leap put there is no margin requirement. drjoe
> >
> > --- In ConservativeOptionS
> > >
> > > Dr Joe
> > >
> > > LP in this example is purchased purely as insurance, meaning that if SP goes ITM than DITM LP would be come to rescue. Have I got this right? The reason for asking is that I don't understand why one needs a LP at all, particularly when you have in excess of 300K in cash?
> > >
> > > Could you not treat this SP as a "cash secured put"? In fact, could you possibly use full 500k cash as insurance and purchase equivalent number of CSP?
> > >
> > > --- In ConservativeOptionS
> > > >
> > > >
> > > > correcting prior post....i received 6.5 selling short puts NOT short calls,,,sorry ..drjoe
> > > >
> > > > --- In ConservativeOptionS
> > > > >
> > > > > i would like to an actual real-time example of what i do with my diagonal put spreads.
> > > > >
> > > > > 10/12/09 sto, 20k's, short put, @1.02 strike 58 11/20/09 expiration
> > > > > expired
> > > > >
> > > > > 11/23/09 sto, 20k's, short put, @1.56 strike 60 12/18/09 expiration
> > > > > expired
> > > > >
> > > > > 12/23/09 sto, 20k's, short put, @1.54 strike 60 2/19/10 expiration
> > > > > expired
> > > > >
> > > > > 2/23/10 sto, 20k's, short put, @ 0.72 strike 60 3/19/10 expiration
> > > > >
> > > > > 3/3/10 btc, 20k's, short put, @ - 0.15
> > > > >
> > > > > 3/3/10 sto, 20k's, short put @ 1.81 strike 65 4/16/10 expiration
> > > > >
> > > > > total premiums collected to date = 6.50
> > > > >
> > > > > PROTECTION
> > > > > 10/28/09 bto, 20k's long put @ - 12.05 strike 60 1/20/12 expiration
> > > > > since i am obligated to purhase stock at 60 strike (initial short put strike) and i paid 12.05 for protection my net obligation is 60+12.05 or 72.05.....but guaranteed 60 (long put strike) or a total of 12.05 at risk which is 20.1% (iwm was at 58.05) a lot higher at risk that i usually do but i felt the market was in an uptrend
> > > > >
> > > > > now, what should i do? i will on monday if markets open favorably.
> > > > >
> > > > > well let's consider this:
> > > > >
> > > > > 3/8/10 stc, 20k's current long put strike 60 for 6.60 and then bto, long put strike 70 for 11.64.....this adds (11.64-6.60) or 5.04 to my net obligation/investme
> > > > >
> > > > > however, i received a total of 6.50 in premiums from selling short calls to date...so 7.09-6.50 or 0.59 is now at risk....that is 0.59/70 or 0.84% essentially risk free....
> > > > >
> > > > > i will have until jan12 or 22 months to collect short put premiums, if assigned, sell calls and if they are assigned also go back to selling short puts....all without virtually no risk at all....drjoe
> > > > >
> > > > > i will let you know what i do......
> > > > >
> > > >
> > >
> >
>
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