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Being a very new trader, please excuse any areas of this post that do not
make sense.
I have had some information given to me that indicates that a long strangle
in the Dec Yen is a position to consider. Rough information indicates to
buy a call about 2.00 above current price and Buy a put about 2.00 below.
This is in anticipation of some strong movement in the Yen, one way or the
other. When it starts to move, I assume that a person would sell either
the put or the call, whichever position is on the wrong side of the move.
In light of the Yen being around 86.00, I did some rough calculations. An
88.00 call is 1.58, and a 84 put would be about 1.34. If my calculations
are correct this would cost $1896 plus commission for the 88 call and $1608
for the 84 put.
A short time ago, my broker gave me some info on entereing an option
position on the Canadian $ . The idea was to buy a 730 call with a premium
of .66 or $660. To cheapen up the trade, he also advised the following.
Sel a 750 call @ .13 or $130 and sell a 720 put @ .47 or $470. This made
the net cost of the position .06 or $60 plus commission. If I understand
this correctly, it limits the upside to the trade to the Can$ going to 75.
He also advised putting a stop on the put at a premium of .80.
In light of this info on the Can$, I was trying to figure out how this
would work with the Yen situation to cheapen up the entry. I did the
following calculations in regards to opening positions.
Buy 88 yen call @ 1.58, Sell 92 Yen call @ .73 and Sell 82 Yen put at .72
for a net prem cost of .13. On the other side of the strangle I
calculated, Buy 84 put @ 1.34, Sell 80 put @ .56 and sell 92 call @ .73 for
a net prem cost of .05. All in all these position work out to a net cost
of about $216 plus commission.
My problem now is that I am confused with all of these numbers, as to what
potential for profit would be left, and also what risk is there in this
position. More than that, does this even make any sense?
Any and all feedback gratiously accepted.
Allan Green
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