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Reread what I wrote. I didn't say he should fear anything. He actually put on
a collar of sorts for a credit. using the 34 puts and the 36 calls to net a
profit. His maximum risk is 1 3/4 to the downside with 2.40 income. net profit
at 0 on the stock is 2.40-1 3/4. On the upside he makes 1 point on the stock
plus the 2.40 in premium less the cost of the put. Having been a market maker,
trading my own account and able to retire 17 years ago, I think I understand
options. Ira
MikeSuesserott@xxxxxxxxxxx wrote:
> Ira,
>
> your argument is in error. In Ben's original position, being long 2000 QQQ,
> why should he fear that position to go to 100?
>
> Even if the stock were called away early, it would mean for Ben to have
> realized his profit sooner, and to still own the long puts.
>
> The equivalence of the two positions is a mathematical fact. Just do the
> math or feed the positions into some option software, and you'll see for
> yourself.
>
> Regards,
>
> Michael Suesserott
>
> > -----Ursprungliche Nachricht-----
> > Von: Ira Tunik [mailto:irat@xxxxxxxxx]
> > Gesendet: Tuesday, February 19, 2002 16:53
> > An: realtraders@xxxxxxxxxxxxxxx
> > Betreff: Re: [RT] Selling Covered Calls
> >
> >
> > Wrong. You do not have a calander spread, you have unlimited
> > risk. to the
> > upside. The stock is the protection against the stock going to
> > infinity. Look
> > at where you are with the stock at 100 and then tell me you have
> > a time spread.
> > Ira.
> >
> > MikeSuesserott@xxxxxxxxxxx wrote:
> >
> > > Ben,
> > >
> > > your position is equivalent to a calendar spread
> > > buy 20 March 34 Puts
> > > sell 20 April 36 calls
> > >
> > > You'd get the same risk/reward characteristics without having to tie up
> > > capital in the purchase of the QQQ stock.
> > >
> > > Regards,
> > >
> > > Michael Suesserott
> > >
> > > > -----Ursprungliche Nachricht-----
> > > > Von: profitok [mailto:profitok@xxxxxxxxxxxxx]
> > > > Gesendet: Tuesday, February 19, 2002 16:25
> > > > An: realtraders@xxxxxxxxxxxxxxx
> > > > Betreff: Re: Re[2]: [RT] Selling Covered Calls
> > > >
> > > >
> > > > maybe an example will make everyone happy
> > > >
> > > > buy 2000 qqq at 35
> > > > sell 20 April 36 calls at 2.4
> > > > buy 20 march 34 at .75
> > > > ----- Original Message -----
> > > > From: "TheQuant" <thequant@xxxxxxxxx>
> > > > To: "Daniel Goncharoff" <realtraders@xxxxxxxxxxxxxxx>
> > > > Sent: Monday, February 18, 2002 8:53 PM
> > > > Subject: Re[2]: [RT] Selling Covered Calls
> > > >
> > > >
> > > > > Hello Daniel,
> > > > >
> > > > > Tuesday, February 19, 2002, 5:38:35 AM, you wrote:
> > > > >
> > > > > DG> When was selling covered calls (which is indeed similar
> > to selling
> > > > > DG> puts) discussed?
> > > > >
> > > > > I went back and re-read his post you are correct. However I have
> > > > > trouble understanding the method. He sells calls, then understands
> > > > > the risk so he sells tons of puts. Did he also have tons
> > of calls or
> > > > > a half a ton of calls. I think he has been lucky for 7 months?
> > > > > What's the exact method or is it seat of the pants?
> > Besides that Ric
> > > > > brings up some very interesting points about the whole
> > thing and read
> > > > > Tom Bowen's most recent post. Especially the part about the audited
> > > > > (independently)track record. If I only had a nickle for
> > every bright
> > > > > star that has claimed to have made "Tons of Money" trading.
> > > > >
> > > > > DG> I thought Ben was talking about a strategy that was more like a
> > > > > DG> collar, if I understood it correctly. It seems to me that Ben's
> > > > > DG> strategy is based on differences between real price
> > movements and
> > > > > DG> the pricing of options, which is usually done on the basis of
> > > > > DG> probabilistic models. Whether you believe it works or not, his
> > > > > DG> downside is limited, which makes it look a lot different than a
> > > > > DG> naked short put -- more like a bull put spread.
> > > > >
> > > > > Bunk his downside is limited!, the way the post reads he
> > had more puts
> > > > > bought "Tons" then calls. Either way he could have lost on
> > the trade,
> > > > > contrary his broker is smiling.
> > > > >
> > > > > DG> Regards
> > > > > DG> DanG
> > > > >
> > > > > What Ric writes below is an eye opener! He is absolutely correct!
> > > > > People can get crazy I tell you trying to avoid risk but rather
> > > > > causing self fulfilled prophecy of doom upon themselves!
> > > > >
> > > > > DG> ric ingram wrote:
> > > > > >>
> > > > > >> Hi,
> > > > > >>
> > > > > >> But some people have a real perception problem - and do
> > not know it.
> > > > > >>
> > > > > >> It is only reasonable to point out that given that you
> > intend to hold
> > > > the
> > > > > >> underlying, selling a covered call actually reduces your
> > > > exposure to a
> > > > big
> > > > > >> fall. So if you were going to hold the underlying
> > anyway, selling
> > > > covered
> > > > > >> calls can be considered a conservative strategy.
> > > > > >>
> > > > > >> However if you do not hold the underlying or do hold it
> > but do not
> > > > intend
> > > > > >> to keep it, buying the underlying and selling a covered
> > call is the
> > > > same as
> > > > > >> selling a naked put.
> > > > > >>
> > > > > >> Paradoxically, selling naked puts is actually lower risk
> > than holding
> > > > the
> > > > > >> underlying if you allocate the same capital as you would
> > > > have done for
> > > > > >> holding the underlying.
> > > > > >>
> > > > > >> But rationality is rarely a bedfellow with fear or greed.
> > > > > >>
> > > > > >> Unconditionally yours, Ric.
> > > > > >> www.traderscalm.com
> > > > >
> > > > >
> > > > > --
> > > > > Best regards,
> > > > > TheQuant mailto:thequant@xxxxxxxxx
> > > > >
> > > > >
> > > > >
> > > > > To unsubscribe from this group, send an email to:
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> > > > >
> > > > >
> > > > >
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> > > >
> > >
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