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Right, I'm still short the option, so the future is there to deliver
when the option is exercised. If it heads back down (we are talking
calls), that's fine provided it doesn't go back out of the money. If it
does then I'm sitting with a future that won't get exercised and my
strategy is to sell the future and buy back the option - hence the loss
of approx 60% - I didn't really want to bore everyone with the details.
Being delta neutral isn't something I strive for. I'm not saying that
it's wrong, but it's just different to what I do.
I think that we are getting way off thread here, and probably abusing
the hospitality of the good folks at OmegaList. My original intention
was to defend the bum rap given to the noble art of selling options:)
John R Pretorius
In a message dated 7/6/2006 4:41:15 PM Eastern Standard Time,
johnpretorius@xxxxxxxxxxxxx writes:
put a futures stop at the strike+premium and that takes care of another
22% where I (normally) just lose my brokerage.
I take it that you are still short the option and then have the futures
contract that you bought cover the assigned contract once it finishes in
the
money. What happens when you buy at the strike+premium and then the
futures
reverses and starts heading down? What do you do then?
According to an option class I took at ThinkorSwim (and recommend), you
buy
half the number of contracts that you are short, in order to get delta
neutral, instead of the full amount which puts you in a net long
position.
Howard Bernstein
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