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Gitanshu:
I think that the ATM spreads are more attractive than the ITM spreads.
Based on your examples provided below:
++++++++++++++++++++++++++++++++++
>Intel: Stock @ 70
>Sep 55c 15.50
>Sep 65c ask 6.5
>Short spread: 9.00
The facts
The max profit is $ 9 if INTC falls to 55 or lower from 70 at expiration
The max loss is $ 1 if INTC stays above 65 at expiration.
Time prem sold on 9/55 calls = $ 0.50
Time prem bought 9/65 calls = $ 1.50
Today Mon 8/21, INTC is approx. 73 3/8.
++++++++++++++++++++++++++++++++++
>Cisco: Stock @ 63.375
>Sep 50c 14.125
>Sep 60c 5.75
>Short spread: 8.375
The facts
The max profit is $ 8.375 if CSCO falls to 50 or lower from 63.375 at
expiration
The max loss is $ 1.625 if CSCO stays above 60 at expiration.
Time prem sold on 9/50 calls = $ 0.75
Time prem bought 9/60 calls = $ 2.375
Today Mon 8/21, CSCO is approx. 65.
++++++++++++++++++++++++++++++++++
In both cases above, everyday that goes by, all things being equal, the
spread reaches closer to parity (-10)
In addition, you will have to close each of those positions or take some
other corrective action prior to the end of Sep.
IMO, there appears to be a good likelihood that the trades above will incur
a loss at expiration.
++++++++++++++++++++++++++++++++++
Citibank: Stock @ 74.75
Sep 65c 10.25
Sep 75c 2.50
Short spread: 7.75
The facts
The max profit is $ 7.750 if Citibank falls to 65 or lower from 74.75 at
expiration
The max loss is $ 2.250 if Citibank stays above 75 at expiration.
Time prem sold on 9/65 calls = $ 0.50
Time prem bought 9/75 calls = $ 2.75
++++++++++++++++++++++++++++++++++
OEX: Index @ 815
Aug 800c 15.25
Aug 810c 6.125
Short spread 9.125
The OEX on EOD for 8/17 and 8/18 was approx. 815.0 and 813.6 respectively.
In either case, the spread lost money (7/8)
++++++++++++++++++++++++++++++++++
OEX: Index @ 815
Sep 805c 24,00
Sep 815c 17.75
Short spread 6.25
The facts
The max profit is $ 3.75 if OEX falls to 805 or lower from 815 at expiration
The max loss is $ 6.25 if OEX stays above 815 at expiration.
Time prem sold on 9/805 calls = $ 14.00
Time prem bought 9/815 calls = $ 17.75
This spread seems more attractive than the other ones.
++++++++++++++++++++++++++++++++++
My last 2 cents worth on this topic.
Thanks,
Marshall M. Liu
-----Original Message-----
From: Gitanshu Buch [mailto:OnWingsOfEagles@xxxxxxxxxxxxx]
Sent: Thursday, August 17, 2000 7:12 PM
To: metastock@xxxxxxxxxxxxx
Subject: RE: What options to sell?
>However, I don't think in the real
>options world that it's possible to place
sure it is, you can place one @ the open tomorrow in any number of
combinations. Aug/other months.
Regardless of underlying. Stock, index, futures.
Here are some examples from tonight for deep, at and out of the money
spreads: These give you a flavor of the different risk/rewards at difference
depths of intrinsic - since the idea is to be short one would use from among
a menu like this depending on the risk/certainty one felt regarding the
trade.
Intel: Stock @ 70
Sep 55c 15.50
Sep 65c ask 6.5
Short spread: 9.00
Cisco: Stock @ 63.375
Sep 50c 14.125
Sep 60c 5.75
Short spread: 8.375
Citibank: Stock @ 74.75
Sep 65c 10.25
Sep 75c 2.50
Short spread: 7.75
OEX: Index @ 815
Aug 800c 15.25
Aug 810c 6.125
Short spread 9.125
OEX: Index @ 815
Sep 805c 24,00
Sep 815c 17.75
Short spread 6.25
Gitanshu
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