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List,
OK, we've finally determined that we're going to be in the option writing
business as opposed to the option buying business. Our primary reasons for
this are:
1- Time dilution works in our favor.
2- Capitalizes on our SP trading system.
I would like to pose the following question assuming that we want to sell
ITM Calls since we are now short the S&P futures. In looking at the various
Calls available, how would I determine which ones to write (or which others
not listed and why)?
1- SXZLO Dec 2000 1475 Calls @ 88.1250
2- SXMFT Jun 2001 1500 Calls @ 143.25
3- SXZIO Sep 2000 1475 Calls @ 38.00
First, there are a few things that need to be considered. Our trades, on
average, last for approximately two weeks. They can, at times last a month
or two but that would be quite unusual. We would like to maximize the time
dilution factor in our favor and at the same time minimize our whatever
margin we have to maintain. We learned about this the hard way a trade or
two ago when I sold 10 Sep SPX Calls at 46 and didn't impact my trading
account at all while my brother sold August Calls and had to put up margin
of $89,000 for the 10 Calls he wrote.
I guess I better call my Schwab desk to find out what the margin rules are
for trading the near month (you can tell we're futures traders).
Thanks in advance,
Guy
Never be afraid to try something new. Remember, amateurs built the ark,
professionals built the Titanic.
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