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nwinski wrote:
>
> Allan Green wrote:
> >
> > 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
>
> Allan,
> Without going into a detailed analysis of these positions, in my
> opinion, the key phrase above, which you did not detail, is "plus
> commissions". These look like wonderful positions for a broker. As
> a broker, your client has limited risk and commissions on four legs
> for each spread unit. So with limited risk and hence limited profit
> potential the major factor here to inquire about your commission rate.
> I hope you are not paying more than $20-25 r.t. A 4 legged spread,
> based on a $25 r.t. will cost you $100 r.t. What percent of the profit
> potential on these spreads does that commission cost represent? If
> the answer is more than 10%, then you are either paying too much in
> commissions, you need to look for other types of spreads, or you need
> to look for another broker - hopefully another type of broker.
>
> "Optgectically",
>
> Norman
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