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
>
> 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
> >
> > 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....
> >
> > --- In ConservativeOptionS
> > >
> > > 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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