AW: [RT] GEN: The synthetic straddle trade EMC

[MikeSuesserott@xxxxxxxxxxx]

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color=#000080>Gitanshu,
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color=#000080>thanks for your thorough explanation. I certainly 
appreciate the time and effort you put into these emails. Your last post with 
the EMC example made it all crystal clear.
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color=#000080> 
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color=#000080>Actually, and this is where I misunderstood, you are not 
really trading straddles at all, neither synthetic nor real. Rather, you are day 
trading the underlying against a long option position. 
<FONT 
face="Courier New" color=#000080>So, naturally, the question of margin for your 
short positions in the underlying is of no importance to you, and your technique 
is certainly valid.
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color=#000080> 
<FONT face="Courier New" 
color=#000080>Kind regards,
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color=#000080> 
<FONT face="Courier New" 
color=#000080>Michael Suesserott
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color=#000080> 
 -----Ursprüngliche 
Nachricht-----Von: Gitanshu Buch 
[mailto:onwingsofeagles@xxxxxxxxxxxxx]Gesendet: Thursday, November 
16, 2000 20:22An: realtraders@xxxxxxxxxxxBetreff: Re: [RT] 
GEN: The synthetic straddle trade EMC

  Here's an example of what worked: See chart for number 
  references.
   
  1. Bot 90 calls for 7/8. Cost 87.5 x 2 = 175 = capital 
  outlay step 1.
  2. Short stock at 88 7/8 = capital outlay step 
  2.
  Here the max risk is the inital capital outlay + 1 1/8 which 
  is the distance from short entry to strike price.
   
  3. Covered stock at 86 1/2. Gain 237.50
  4. Short stock at 90. Calls were bid 250 x 2 = worth 500. 
  Could sell calls & call it a day.
  5. Covered stock at 86 1/2. Gain 350.00
   
  Currently: Holding 90 calls, now bid 
  9/16 bid x 2 = worth 112.50. 
   
  Total position profit/loss:
  On stock: Gain 587.50 per 100 shares.
  On calls: Loss 62.50
  Net Net: Gain 525 less commission.
   
  Going forward:
   
  I could sell the 90 calls and realize the 9/16 cash, or 
  short stock if it rallies --> fails or sell the calls for more than 9/16 
  when it rallies and go home, or short 85 calls if it doesn't rally or I just 
  do nothing and sit on the calls hoping that XYZ will come in humongo short EMC 
  and get a margin call tonight after it preannounces that it has cracked the 
  puzzle of life and taken responsibility that they will singlehandedly achieve 
  the entire S&P 500's earnings goal for Q4.
   
  Multiple choices, created by initial position and by stock's 
  price behavior.
   
  Hence, the initial position = working capital; no 
  directional bias, 
   
  Hope this & attached chart clarifies where I was coming 
  from.
   
  GitanshuTo 
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