|
PureBytes Links
Trading Reference Links
|
Ira,
please look at the chart "ben.gif" that I sent previously. Now read the
caption. It says,
Long 2000 QQQ
Short 20 Apr 36 Calls
Long 20 Mar 34 Puts.
Isn't this exactly what you just confirmed Ben wrote? "Ben is long puts and
short calls and long stock," you said. So the chart "ben.gif" depicts Ben's
position. Is this understood? Are we agreed? OK so far? Can you live with
that? :-)
Now when you look at that chart, you see that this position has no unlimited
risk anywhere. Can you see that? Risk is limited to about -$2,700. That's
the lowest P/L level that curve will reach during the lifetime of the
position. You see that?
So we have now established that there is no unlimited risk in Ben's
position, in contrast to what you promulgated here.
Next. My point was that Ben could have established an equivalent position by
doing a calendar spread. So what I am saying is that the long puts/short
puts calendar spread shown in the second chart looks exactly the same and
has the same risk/reward characteristics as Ben's original position.
The blue curve in the first chart shows Ben's position.
The red curve in the second chart shows a calendar spread position.
I said these two are equivalent, meaning, "blue curve is same as red curve."
The charts prove that this is so.
Regards,
Michael Suesserott
> -----Ursprungliche Nachricht-----
> Von: Ira Tunik [mailto:irat@xxxxxxxxx]
> Gesendet: Tuesday, February 19, 2002 21:30
> An: realtraders@xxxxxxxxxxxxxxx
> Betreff: Re: [RT] Selling Covered Calls
>
>
> Once again you have the wrong information. Ben is long puts and
> short calls and
> long stock. Definitely not long puts and short puts. Check your
> input again.
> Put in long 35 puts and shourt 36 calls and see what you chart
> shows you. Ira
>
> MikeSuesserott@xxxxxxxxxxx wrote:
>
> > Ira,
> >
> > I am so glad to hear that you were able to retire early (I was,
> too), and
> > that you believe you understand options.
> >
> > Unfortunately, your analysis is still totally wrong. Ben's
> original position
> > is indeed equivalent to a calendar spread, and furthermore,
> risk is totally
> > limited here.
> >
> > To prove this, please find attached two charts. The first one, ben.gif,
> > shows Ben's position as originally indicated by him. The second
> chart shows
> > the equivalent calendar spread. If you were to superimpose
> them, you would
> > find them exactly congruent.
> >
> > You may also notice that there is no unlimited risk, and that
> the greatest
> > profit potential is to the upside.
> >
> > Regards,
> >
> > Michael Suesserott
> >
> > > -----Ursprungliche Nachricht-----
> > > Von: Ira Tunik [mailto:irat@xxxxxxxxx]
> > > Gesendet: Tuesday, February 19, 2002 17:31
> > > An: realtraders@xxxxxxxxxxxxxxx
> > > Betreff: Re: [RT] Selling Covered Calls
> > >
> > >
> > > 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:
> > > > > > > > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > > Your use of Yahoo! Groups is subject to
> > > > > > http://docs.yahoo.com/info/terms/
> > > > > > >
> > > > > > >
> > > > > >
> > > > > > To unsubscribe from this group, send an email to:
> > > > > > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> > > > > >
> > > > > > Your use of Yahoo! Groups is subject to
> > > > http://docs.yahoo.com/info/terms/
> > > > >
> > > > >
> > > > > To unsubscribe from this group, send an email to:
> > > > > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> > > > >
> > > > >
> > > > >
> > > > > Your use of Yahoo! Groups is subject to
> > http://docs.yahoo.com/info/terms/
> > >
> > > To unsubscribe from this group, send an email to:
> > > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> > >
> > > Your use of Yahoo! Groups is subject to
http://docs.yahoo.com/info/terms/
> >
> >
> > To unsubscribe from this group, send an email to:
> > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> >
> >
> >
> > Your use of Yahoo! Groups is subject to
http://docs.yahoo.com/info/terms/
>
> To unsubscribe from this group, send an email to:
> realtraders-unsubscribe@xxxxxxxxxxxxxxx
>
> Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
>
>
> To unsubscribe from this group, send an email to:
> realtraders-unsubscribe@xxxxxxxxxxxxxxx
>
>
>
> Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
>
> ------------------------------------------------------------------------
> Name: Ben.gif
> Ben.gif Type: GIF Image (image/gif)
> Encoding: base64
>
> Name: cal_spr.gif
> cal_spr.gif Type: GIF Image (image/gif)
> Encoding: base64
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
------------------------ Yahoo! Groups Sponsor ---------------------~-->
Get your FREE credit report with a FREE CreditCheck
Monitoring Service trial
http://us.click.yahoo.com/ACHqaB/bQ8CAA/ySSFAA/zMEolB/TM
---------------------------------------------------------------------~->
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
|