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> I am going to try to stir interest in this one more time.I have been
> studying this and hate failure.In my pursuit I have not come across this
> method which concivably could work 9 of 10 times.In examination you will
> see price is set 7% from upper and lower limits penetration that may only
> happen 1 or 2 times per year.Assuming the worst [$1500 premium X 10 wins =
> $15,000 - protection cost - premium or $3500 -$1500 [2 X $2000]= $11,000
> profit per Strangle per year.My estimate is $7500 per Strangle could make
> this lucrative. > > > > I think Strangles are doable if:
sure they are - your broker is happy to get the comish :-))
> 1.You can sell a 1510 call at a decent price.
> 2.Sell a 1320 put at a decent price.
whats a DECENT price ?
...the problem is that you will in that OF THE MONEY options probably
have about zero interest from other parties and you most likely
have to trade on a ugly bid/ask spread.
> Protect the position by buying a 1510 call if S&P hits 1485
> and buying a 1320 put if S&P hits 1345.
"protect" is a nice word - really depends how much time value has elapsed
since you took the position on board...... if that was just short while ago and
your option has enough time to go you will PROTECT at a hammer loss. If
enough time has gone by you most likely will be able to cut at par.
Assuming you put on the trade in the MIDDLE of your range - about 1415 and
your are willing to give it room to move 70 BPS (big points), we know the S&P
loves moving that distance in just 3 days some times and you wont have had
any loss of time premium in your favour.
MAYBE we can do a PROPER example - what PREMIUMS would you
currently get for your stuff (assuming we have 4 weeks to go to expiration)
and what VOLATILITY do we want to use ? There is enough software outta
there who does some nice graph - if you provide those numbers I have a look.
GENERALLY: If you are aware the RISK - and thats a BIG ONE - you can do
it, but be carefull in case of low volatility (if that ever shows up in S&P <g>) as
you will have too few premium to start with.......
..give us some numbers.......
rgds hans
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