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Norman..
I understand what your saying..
On the other hand, not many people are perfect timers. Maybe get in there + or - a
day.. I guess Ben, likes the cheap insurance of $1250.00, to not experience a
potential realized drawdown of 50 to 80 SnP points.. or $12,500 to $20,000. If
one is early, it can be rough.. if one can't be tough in psyche or margin..
OBTW, Nice call on index :)
In Synthetically,
Don
nwinski wrote:
> Proffittak@xxxxxxx wrote:
>
> > In a message dated 4/3/99 10:02:25 PM Eastern Daylight Time,
> > nwinski@xxxxxxxxxxxxxxx writes:
> >
> > << HI
> > > As i menthened to everyone before it is simple
> > > if you are long sp@ 1300 you buy the 1295put
> > > this will give you ALWAYS a max loss of $1250
> > > and a week later when sp500 is 1.6% higher you sell the put at a small
> > > loss(it has life to 6/18/99).
> > > hope this helps
> > > Ben,
> >
> > Long a futures contract and long a put = long 1 call. Rather than
> > paying
> > double commisions,
> > why not just buy a call for $1,250, as it should be the same result with
> > lower
> > transaction costs.
> >
> > Simply,
> >
> > Norman >>
> > good morning all
> > a call that cost only 1250 will not move $250 for every sp point.
> > doing it my way is an insurance policy that only reduces risk (even
> > overnight) on
> > the long sp with the ability to sell the insurance policy when the long
> > trend has been established.
>
> NW: Yes, calls tend to cost more than their equivlent put. But, with the
> simple long call you will have to put up less capital than being long a future
> and long a put. I also think that if you subtract the erosion and devaluatoin
> of the put as the future appreciates that the net result will be about the same
> as just
> long the at the money or slightly out of the money call. When comparing these
> two positions, remember that by being long only the call, you will incurr
> premium erosion on only the call vs. premium erosion of both the put and the
> futures contract.
>
> >
> > In my trading an establish move is when spoos are 1.6% ahead of my buy
> > price.
> > so in my example. when i buy sps @1300 and bought the 1295 june put. i
> > will sell the put when spoos hit 1320.8.
> > at that point will put the stop loss on the future@xxxx
> > some days this happen as a day trade!!!!
>
> NW: So how much did you lose on the put? I bet the amount you lost on the put
> is just about equal
> to the amount you complained you didn't make on the call? There are traders on
> the floor who make it their business to keep these things in line. A one or two
> tick variation in a conversion type situation is a big profit making
> opportunity for the floor traders. Therefore, their actions will not allow the
> long put, long futures, vs. long call to get more than a few ticks out of line.
> Therefore, with everyone properly valued, the long call should act the same as
> your synthetic call (long 1 futures and long 1 put) only you will have more
> transaction costs. The big difference comes from the fact that the floor
> traders values the transation costs as reflected by the conversion values based
> on their low cost. But, you must pay off floor costs, unless of course you are
> a floor trader. So, an extra transaction for them may only cost them $1 each
> way whereas it will probably cost you $7 and up each way, not to mention their
> abiility to buy on the bid or sell on the ask vs. your probable slippage. . The
> net result is that fewer transaction costs has a bigger impact on the bottom
> line for the off floor trader than it does for the floor trader. Calls that
> are valued based on the long futures and long put will in the eyes of the off
> floor trader tend to be slightly undervalued because the floor traders only
> factor in their transaction costs .
> The bottomline is, try it, you might like it. Monitor how the two positions
> compare in a real time situation. You may be converted. <G> On the other
> hand, there maybe times when the married put (synthentic call) is relatively
> undervalued vs. the comparable call. On those occasions it makes sense to go
> long the futures with a long put. But, to go into the market with a blind bias
> is like giving the floor traders a blank check written on your account.
>
> Exercisedly,
>
> Norman
>
> >
> > best regards
> > Ben
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