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No, I fully understand what you are doing. Ira.
profitok wrote:
> Hello IRA
> I always close the long put the day BEFORE expiration and replace it with
> next month same strike price
> (do not forget qqq strike prices are only one dollar apart)
> both orders are entered at 350 est and 355 est so no possible no fill(at
> market,,)
> qqq option are so liquid bid and ask are mostly 10 cents apart
> I also NEVER get called away as I am always selling 2 month out
> the assignment is ALWAYS the front month
> and on expiration day I replace the next month option with 2 month out
> any questions?
> nice evening
> Ben
> ----- Original Message -----
> From: "Ira Tunik" <irat@xxxxxxxxx>
> To: <realtraders@xxxxxxxxxxxxxxx>
> Sent: Tuesday, February 19, 2002 5:09 PM
> Subject: Re: [RT] Selling Covered Calls
>
> > I am sorry that we disagree, but there is risk in his postions. The
> assumption
> > is that he can roll, or that he is deep in the money on one side or
> another.
> > What happens when the put expires and price is between the strikes, now he
> is
> > exposed. What happens if the call is exercised? There are a lot of what
> ifs
> > in the position. As for the put spread equivilant, your chart shows one
> thing,
> > but if my thinking hasn't gone all bad on me, then the maximum value that
> a time
> > spread has is at the strike price and the spread collapses as price moves
> away
> > from the strike price. By the way a time spread is one in which both the
> long
> > and short are at the same strike price. I don't believe, that your
> example used
> > the same strike prices, therefore, not a time spread. The principle of a
> time
> > spread is to sell it at the strike and buy it as it moves towards the
> strike.
> > Now our terminology may be mixed, but those are my thoughts on the matter.
> Ira.
> >
> > MikeSuesserott@xxxxxxxxxxx wrote:
> >
> > > 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.
> > >
> > >
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> > >
> > >
> > >
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>
>
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