From: RobertH <robhansen5252@
To: ConservativeOptionS
Sent: Wed, April 7, 2010 10:15:54 PM
Subject: [ConservativeOption
No way this is in any way a synthetic covered call. A synthetic covered call is a naked put. This diagonal leap spread is more of a "pretend" covered call, using the leap as a stock substitute.
For those synthetically challenged, the formula is: Long Stock = Long Call plus Short Put. The calls and puts must have the same strike price as well as the same expiration date. So, by remembering this formula, you can easily obtain any of the synthetics.
If S = C - P, then stock with a short call will be S - C which will then equal -P, or a short put. To convince yourself of this, just use the TOS simulated trade function and plug in both scenarios. But to really get excited about this, you can convert/reverse a position (in other words, shut off any further profit or loss in the position) by applying the appropriate synthetic opposite. If your covered call is going down the toilet, buy the corresponding put to slam on the breaks and buy some time to get your feet back on the ground. That and maybe a little Dalwhinney.
RFH
--- In ConservativeOptionS trategies@ yahoogroups. com, scott volkers <flyspv@...> wrote:
>
> Hi Tom,
>
> I had looked at that and yes it is considered a synthetic covered call.  I have found it locks up a lot of capital, but I find it hard to find enough premium to make it worthwhile on the short.  Â
>
> I have traded diagonals and calendars more.  I am curious if you are targeting certain historical volatility or IV as part of the formula.    Calendars I shoot for conservative 15% return and exit.
>
> Scott
>
>
>
>
> ____________ _________ _________ __
> From: Tom Clark <tec@...>
> To: ConservativeOptionS trategies@ yahoogroups. com
> Sent: Tue, April 6, 2010 11:36:01 AM
> Subject: [ConservativeOption Strategies] Diagonials
>
> Â
> I don't see the diagonal strategy discussed here. Diagonal - short
> front month call covered by DITM long call 9 to 15 months out. I've
> also heard this call a synthetic covered call. I've been very
> successful using this spread over the past year both for individual
> stocks & ETF's. Are there others here using this strategy? Care to
> share your comments?
>
> Current positions - XLF, IYR, MDY
>
> Thanks
>
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