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In a message dated 1/30/00 4:57:47 PM Eastern Standard Time,
gary@xxxxxxxxxxxx writes:
<< At current prices, 100 points out of the money is about 7.3%. Using
the table above the chances of the short calls going in the money
is about 10%, and the downside is limited to about 15 SP points,
which is more than made up by a 100 point move in the SP.
As you mention, in that scenario, you're probably out about
25 points, but made 75, so this is okay.
The typical case (in this multiyear bull market is a 2.3%)
monthly move, or about 30 SP points. Assuming 50/50 odds
of picking the direction correctly, the expected profit
is 30 - 13, or about 17 S&P points/month, which is
probably about 100% return on margin. Not too shabby.
However, if the market goes sideways for a while, you're
out 13/month, and worst case you're out 39 points for
a few of those months if the market sells off.
The strategy you're using is a good one in the current
market environment, but seems to depend fairly strongly on
the bull market staying in gear.
>>
Hello
You have put a lot into this research
however as i answered before
A: the options give me credit!!! most times 40-50K
(in a hi volatility quarter even 75000)
and b: when i get stopped out of my long @ 50 hours and 55 hours exp. m/a
i stay short the calls and long the puts
c: when we close under the daily 50 and 55 i close other 1/2 of longs
futures
and still short all calls and long puts
(nothing to buy or spend commission on)
d: when we close under the 89 hour expo m/a i initiate the short
and buy to close the short calls
e: when we close under the 89 day exp. m/a i buy the other 1/2 of the
short
position and buy long calls (for insurance)
hope this helps
Regards,
Ben
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