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I have a question for any option traders to offer an opinion on.
What do people on here think of Time Spreads.
Here is the formula
4 x time = only 2 x dollar value
in other words an option with 24 months worth of time is usually only worth
twice as much as one that is six months out or less. Therefore you are
getting all that extra time at half the price is the thinking.
What my learned friend is doing and bragging about:
is that in futures he is doing the following:
The June 2002 contract of Gold is at around 290 so he buys a June 2002 call
at the 290 strike price for say 21 bucks.
He then goes to the November 2000 contract price of gold which is around 270
so he sells a November 2000 270 call for five bucks..taking in the premium,
His plan is every month let the front month call he sells expire
worthless..keeping the premium and setting up another one in the next
month...and so on and so on...using the June 2002 call as insurance.
What do the option traders on here think about this?
Rick
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