I bought BP June options on the 9th when the stock was at $34+. I bought a 34 Put @1.43 and a 37 Call@ .75, total 2.18 plus commission. By day's end BP was at $29, so I was up 10+% on the put, plus whatever the call was worth. Listening to everybody from the President to Sara Palin dumping on BP I couldn't imagine them doing anything else but going down so I kept the position. Rookie mistake!
Anyway, as of today before Monday's time decay, If I sold both positions I'd be about even or up 1/2% for two days.
I'll wait it out a bit and perhaps roll next week if there's no movement.
My thinking is that this volatile market should be a good setting for strangles and straddles. I may be wrong but it's a learning experience and I think I may have found something that will work for me. I'll probably go in a bit more seriously in July.
Somebody mentioned iron condors and at first I was enthused but my sense is that they can be treacherous and require a lot of maintenance, with a big downside and a much smaller upside.
Lou
--- In ConservativeOptionStrategies@yahoogroups.com, "the1educator" <gobw2@...> wrote:
>
> Lou - let's make it simple and put some numbers to this. BP is around 33-34.
> So - you buy a 33 call @$2.40, buy a 32 Put @ $1.14. Total cost $3.54 + Commissions/fees. Don't know how many contracts, but lets say $3.75 total cost.
> As BP moves down, call looses value, put worth more. Reverse as moves up. When the combined prices of put & call exceed your cost of $3.75, you can close out and make money. The variation today was from a high of $34.05 to a low of 33.25.= .80. I do not see it - - Unless you knew to sell the put at the low and the call at the high. If you did, I want to follow you.
>
>
> -- In ConservativeOptionStrategies@yahoogroups.com, "Louis" <loupi3@> 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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